iir 

m 

$B    Efi    31b 

^!-;i<!! 


iiiiiili 


,v;^r^ 


flO':sW 


o 


UNIVERSITY  OF  CHLIFORNIA 

HY 


C,  p.  HUNTINGTON 

cJUNE,   18Q7. 


Recession  Nov^O  /  0  9       Class  No 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/essayonresumptioOOcooprich 


AN  ESSAY 


ON   THE 


RESUMPTION  OF  SPECIE  PAYMENTS, 


OOMPAKED   WITH   AN 


IRREDEEMABLE  PAPER  CURRENCY. 


EFFECTS  OF  OUR  FOREIGN  INDEBTEDNESS  UPON  OOMiMERCE,  BUSINESS,  AND 
MONEY   DISTRIBUTION;    WITH    COMMENTS   UPON   THE   SPEECH   OF 
SENATOR  JONES,  OF  NEVADA.  AND  THE  OPEN  LETTER  OF     ^ 
REV.  DR.  BACON,  OF  YALE  UNIVERSITY,  UPON  .. 

THE  NATIONAL  FINANCES. 


By    S.    COOPER. 


San  Francisco: 


PBINTED  BT  THE  PKINTING  AND  LTTHOGBAPHING  DEPABTMENT  OP  A.  L.  BANCBOPT  A  CO. 

1874. 


AN  ESSAY 


RESUMPTION  OF  SPECIE  PAYMENTS, 


OOMPAEED  WITH  AN 


IRREDEEMABLE  PAPER  CURRENCY. 


EFFECTS  OF  OUR  FOREIGN  INDEBTEDNESS  UPON  COMMERCE,  BUSINESS,  AND 

MONEY  DISTRIBUTION;    WITH    COMMENTS   UPON   THE   SPEECH   OF 

SENATOR  JONES,  OF  NEVADA,  AND  THE  OPEN  LETTER  OF 

REV,  DR.  BACON,  OF  TALE  UNIVERSITY,  UPON 

THE  NATIONAL  FINANCES. 


By    S.    COOPER. 


San  Francisco: 

KtlNTKD  BT  THE  PBHTTlNO  AN1>  LITHOGEiPHINQ  DEPABTMEHT  Of  A.  L.  BAICCBOFT  k  00. 

1874. 


<il 


Entered  according  to  Act  of  Congress,  in  the  year  1874, 

By  S.  cooper, 

In  the  office  of  the  Librarian  of  Congress,  at  Washington. 


PREFACE. 


This  Essay  was  originally  (J^signed  as  a  newspaper 
article ;  but,  growing  out  of  proportions  adapted  to  that 
purpose,  it  is  in  its  present  form  respectfully  dedicated 
to  the  attention  amd  impartial  judgment  of  the  Ameri- 
can people,  whose  prosperity  it  is  designed  to  promote, 
by  the 

AUTHOE. 

EuBEKA,  Humboldt  Co.,  Oal. 


CMP  THE 

U'lflVEBSITY 


or  THK 

XJNIVERSITY 

RESUMPTION  OF  SPECIE  PAYMENTS. 


*'  Concerning  the  propriety  of  the  ultimate  and  even  speedy 
resumption  of  specie  payments,  there  is  scarcely  a  dissenting 
voice,  either  among  the  people  or  the  Press.  ^^  **  Upon  one  point 
only  has  there  been  unanimity — it  is  the  desirability  of  specie 
payments." 

The  above  sentences  are  taken  from  two  articles  in  the 
Republic  for  February,  1874.  They  indicate  a  very  general, 
a  nearly  unanimous,  argreement  in  favor  of  resumption.  I 
dissent.  Eesumption  would  be  unwise,  even  if  it  could  be 
easily  and  readily  accomplished,  and  if  its  accomplishment 
would  not  immediately  be  detrimental  to  the  business  of 
the  country ;  and  I  propose  to  give  some  reasons  for  this 
opinion. 

It  may  be  well  here  to  inquire  what  is  meant  by  * '  re- 
sumption of  specie  payments."  Does  it  mean  that  the  Gov- 
ernment shall  receive  and  disburse  nothing  but  coin  ?  It 
has  never  suspended  the  receipt  of  coin  for  custom  duties, 
nor  the  disbursement  of  coin  for  the  interest  on  its  bonds. 
Since  the  issuance  of  the  national  currency,  it  has  never  re- 
deemed any  in  specie  (except  in  the  way  of  selling  gold), 
and  it  cannot*  be  said  that  specie  payment  of  the  currency 
can  be  resumed,  when  it  has  never  been  begun.  The  na- 
tional banks  never  have  paid  specie  for  their  notes.  How, 
then,  can  they  resume  specie  payments*?.  They  may  redeem 
their  notes  in  specie  ;  that  would  be  redemption,  not  re- 
sumption. 


6  ESSAY  ON  KESUMPTION 

The  phrase  is  borrowed  from  the  old  banks.  They  sus- 
pended specie  payments  and  resumed  specie  payments. 
Under  the  former  bank  system,  bank  suspension  of  specie 
payments  and  business  panic  and  general  bankruptcy 
were  simultaneous.  So,  also,  were  the  resumption  of 
specie  payments  and  the  revival  of  business.  These 
phrases,  the  ''suspension  of  specie  payments,"  and  the  "re- 
sumption of  specie  payments,"  have  not  only  come  to  us 
from  the  old  bank  system,  but  have  brought  with  them  the 
ideas  with  which  they  had  become  associated  in  the  public 
mind.  The  literature  of  finance  and  political  economy,  the 
history  of  banks  and  business,  and  the  experiences  of  the 
people,  had  all  confirmed  the  association  in  the  public 
mind,  of  the  suspension  of  specie  payments  by  the  banks, 
with  business  depression  and  prevalent  bankruptcy,  and 
the  resumption  of  specie  payments  with  business  prosperity. 
They  are  phrases  fraught  with  an  association  of  ideas, 
growing  out  of  an  association  of  facts  and  experiences. 
Therefore,  the  phrases  "a  return  to  specie  payments,"  "  the 
resumption  of  specie  payments,"  convey  to  most  minds  the 
ideas  of  business  prosperity,  steadiness  and  permanence, 
and  are  cited  as  showing  the  only  solid  foundation  on  which 
business  can  be  conducted.  Hence,  the  apparent  unanim- 
ity in  favor  of  the  ultimate  or  even  speedy  resumption  of 
specie  payments. 

If  it  were  desirable  to  resume  specie  payments  the  method 
of  its  accomplishment  would  be  a  subject  of  serious  con- 
sideration. The  resumptionists  have  presented  no  plan 
that  meets  with  general  support  among  themselves,  though 
a  great  many  have  been  suggested.  All  the  plans  proposed 
either  contemplate  contraction  or  would  have  that  eJffect.  I 
now  propose  one  which  I  have  not  yet  seen  proposed,  which 
would  neither  require  nor  effect  a  contraction  of  the  cur- 
rency, viz:  Let  the  tariff  on  imports  be  raised  fifty  per 
cent.  This  would  approximate  the  par  valuer  of  gold  and 
currency;  and  if  not  sufficiently  effective  to  bring  them  to- 
gether, let  the  tariff  be  raised  still  higher.  That  result 
would  be  certain  to  follow.  It  is  not  my  design  here  to 
show  how  this  measure  would  accomplish  the  end  in  view, 
further  than  to  say,  that  it  would  be  a  simple  and  efficient 


OF  SPECIE  PAYMENTS.  7 

means  to  bring  together  the  par  values  of  gold  and  cur- 
rency, inasmuch  as  a  check  upon  foreign  importations 
would  turn  foreign  exchange  in  our  favor  and  effect  a  de- 
cline in  the  price  of  gold.  This  method  of  effecting  re- 
sumption would  be  opposed  by  the  free  trade  resumption- 
ists,  and  by  certain  interests  and  sections,  on  the  ground 
that  it  favored  certain  sections  and  industries  at  the  ex- 
pense of  others.  But  while  it  is  not  likely  to  be  adopted  as 
a  matter  of  choice,  if  resumption  be  brought  about  by  any 
other  method,  it  will  have  to  be  resorted  to  as  a  matter  of 
necessity,  to  supply  the  wants  of  the  Government,  unless 
the  unpropitious  policy  be  adopted  of  increasing  the  rev- 
enues by  internal  taxation. 

Supposing  the  transition  complete,  in  what  form  should 
we  have  resumption?  Would  the  Government  establish 
agencies  to  redeem  its  issues  in  numerous  and  convenient 
localities,  or  only  empower  Assistant  Treasurers  to  redeem  ? 
Would  the  banks  be  permitted  to  redeem  their  notes  in  na- 
tional notes,  or  would  they  be  required  to  redeem  in  gold, 
and  to  keep  a  reserve  of  gold,  thus  being  transformed  into 
gold  banks?  Or,  would  the  whole  field  be  surrendered  to  a 
system  of  gold  banks,  and  government  notes  be  withdrawn 
from  circulation  ?  Or,  will  the  tax  that  killed  the  old  State 
banks  be  repealed,  and  they  be  revived  to  supplant  the  na- 
tional banks  ?  Kesumption  implies  a  new  system  of  finance. 
What,  then,  is  the  new  system  to  be?  Shall  the  change  be 
the  least  consistent  with  the  fact  of  resumption,  continuing 
the  national  notes  in  circulation  and  still  a  legal  tender, 
with  a  limited  bank  circulation  redeemable  in  legal  tenders, 
as  at  present;  or,  shall  resumption  be  accompanied  vvith  a 
system  of  free  banking,  removing  the  limit  of  the  bank  note 
circulation,  with  the  legal  tenders  in  circulation;  or,  shall 
there  be  free  banking,  with  the  legal  tenders  withdrawn, 
leaving  only  gold  and  silver  legal  tenders?  If  we  would 
contemplate  the  effects  of  resumption,  we  must  know  what 
is  to  be  substituted  for  what  we  have.  I  shall  endeavor  to 
show  that  resumption,  in  any  form,  is  undesirable. 


8  ESSAY  ON  RESUMPTION 

Tlie  redeemable  legal  tender  system  of  currency  is  preferohle  to 
a  gold,  or  gold-hose  currency ^  because  its  quantity  is  more  con- 
troldble  and  can  be  preserved  more  uniformly  the  same  per  cap- 
ita through  a  long  period,  or  continually. 

This  gives  steadiness  of  prices  for  a  correspondingly  long 
period,  so  far  as  any  currency  can  effect  that  end,  and  is  in 
accord  with  a  maxim  of  finance,  viz:  ''The  quantity  of  the 
circulating  medium  determines  the  prices  of  exchangeable 
commodities:"  or,  more  briefly,  The  quantity  of  money  de- 
termines prices. 

It  is  erroneously  charged  against  the  currency  that  it  un- 
settles prices;  that  thereby  it  renders  futile  all  business 
calculations;  that  it  requires  wider  margins  to  guard  against 
market  perturbations;  that  these  perturbations  destroy  the 
habit  of  dependence  upon  moderate  and  uniform  rewards  of 
business  and  industry,  fostering  a  thirst  for  and  developing 
reckless  speculation. 

These  effects  attributed  to  our  irredeemable  currency  are 
generally  regarded  as  true  without  examination,  and  as  in- 
separable from  it,  which  is  an  error.  They  are  only"  attrib- 
utable to  a  paper  currency  when  the  increase  of  such  cur- 
rency is  more  rapid  than  the  ratio  of  the  increase  of  popula- 
tion. And  the  same  effects  follow  a  correspondingly  rapid 
increase  of  a  metallic  currency.  The  tendency  of  all  former 
paper  currencies,  and  of  our  present  currency,  from  the  ne- 
cessities of  the  Government  during  the  ivar  to  rapidly  en- 
large the  quantity  of  the  circulating  medium,  has  led  to  an 
association  of  these  effects  with  a  paper  currency  as  insep- 
arable attributes.  They  were  inseparable  from  the  old  bank 
issues,  because  the  aggregate  quantity  of  such  issues  were 
under  no  control  or  limit.  Such  is  not  the  case  with  our 
present  currency;  that  is  limited  and  controlled  by  Con- 
gressional enactment.  Therefore,  the  evils  resulting  from 
an  unlimited,  uncontrolled  and  rapid  increase  or  diminu- 
tion of  the  circulating  medium  are  eliminated  from  our  na- 
tional currency,  and  wherever  the  effects  referred  to  are 
manifest  they  can  be  traced  directly  to  other  causes. 

We  are  invited  to  return  to  specie  payments,  as  the  only 


*  OP  SPECIE  PAYMENTS.  \) 

sound  foundation  for  the  stability  and  steadiness  of  busi- 
ness.    This  is  a  fallacy. 

Resumption  offers  no  guaranty  for  the  steadiness  ofhusiness^ 
hvAthe  contrary, 

A  brief  reference  to  past  experience  will  exemplify  this. 
The  old  bank  system  contemplated  a  direct  inflation  of  the 
currency  whenever  a  new  bank  was  chartered,  or  an  old  one 
enlarged  its  capital.  There  was  no  means  of  controlling  the 
volume  of  the  circulating  medium.  Each  State  could  mul- 
tiply banks  and  bank  capital  at  pleasure.  Up  to  the  time  of 
establisliing  the  Independent  Treasury  system,  gold  was 
useful  only  as  bank  reserves  and  to  pay  foreign  demands. 
State,  municipal  and  corporation  securities  sold  abroad,  in 
addition  to  the  value  of  our  exports,  became  a  fund  against 
which  to  draw  foreign  bills  of  exchange,  to  satisfy  foreign 
demands  for  our  imports.  Gold  had  no  purpose  to  serve 
but  that  of  bank  reserves,  and  so  long  as  we  could  sell  se- 
curities gold  was  as  easily  imported  as  anything  else,  to 
form  reserves  for  more  bank  capital  and  further  inflation  of 
the  currency. 

The  reserves  served  for  three  times  their  amount  of  circu- 
lation, and  when  that  limitation  was  disregarded  the  dispropor- 
tion was  greater.  The  facility  and  temptation  to  inflate  the 
currency  was  irresistible;  and,  consequently,  inflation  was 
the  almost  ever-constant  effect  and  accompaniment  of  specie 
payments  under  that  system  of  banking.  Alternations  of 
inflation  and  contraction  followed  each  other,  until  the  cul- 
mination of  inflation  in  1836,  when  the  whole  country  was 
wild  with  speculation.  Land  speculation  was  never  more 
rife.  Cities  grew  as  if  by  magic.  Manufactures  rapidly 
multiplied  in  the  Eastern  and  Middle  States,  and  the  whole 
known  West  and  Southwest  was  dotted  over  with  projected 
cities  (on  paper).  Commercial,  manufacturing  and  agri- 
cultural pursuits  were  all  stimulated  to  the  highest  degree 
of  activity.  Prices  of  all  products  were  high,  and  importa- 
tions were  immense  compared  with  any  previous  period,  even 
to  the  extent  of  importing  goods  and  products  produced  in 
superabundance  in  our  own  country.  Let  it  not  be  forgot- 
ten  that  this   inflation   occurred    during  specie  payments. 


10  ESSAY  ON  EESUMPTION 

Every  evil  attendant  upon  inflation  was  attendant  upon  this. 
The  reaction  came  in  the  ever-memorable  1837.  Then  camd 
suspension  of  specie  payments.  Fortunes  were  leveled  to 
the  ground.  The  wealthy  were  made  bankrupt,  and  all  busi- 
ness was  prostrated  and  stricken  with  paralysis,  from  which 
it  but  slowly  recovered  with  some  alternations  through  the 
next  six  years,  when  relief  came  to  many  from  the  Urited 
States  Bankrupt  Law  of  1841,  and  to  the  country  by  the 
passage  of  the  tariff  of  1842. 

From  1843  to  1856  there  was  a  general  revival  of  business, 
alternating  with  slight  depressions.  During  this  period 
currency  inflation  had  been  going  on,  while  we  had  specie 
payments,  until  its  culmination  in  1856.  The  reaction  of 
1857  was  a  repetition  of  1837,  though  less  severe.  The  In- 
dependent Treasury  system  established  in  1845,  requiring 
as  it  did  a  comparatively  large  amount  of  coin  for  the  rev- 
enues of  the  government,  had  the  effect,  as  its  friends 
claimed  it  would,  to  check  and  retard  the  course  of  bank 
inflation.  Without  this  check,  the  inflation  would  have 
been  more  rapid  and  the  reaction  severer.  The  supply  of 
gold,  too,  from  California  served  to  increase  inflation  by  in- 
creasing bank  capital,  or  by  increasing  the  currency  by  di- 
rect circulation,  at  the  same  time  that  it  postponed  the  re- 
action by  furnishing  a  supply  from  which  the  banks  could 
replenish  their  reserves.  But  when  the  supply  was  checked 
and  the  importations  increased,  after  the  reduction  of  the 
tariff  in  1855,  reaction  became  inevitable,  and  a  general 
prostration,  with  a  temporary  suspension  of  specie  payments 
and  the  passage  of  stay-laws  by  Western  legislatures,  were 
the  experiences  of  1857. 

Here,  again,  inflation  accompanied  specie  payments,  and 
if  the  country  was  prosperous,  we  cannot  close  our  eyes  to 
the  fact  that  an  uncontrolled  and  uncontrollable  inflation 
was  also  a  fact,  and  entered  more  largely  than  specie  pay- 
ments as  a  cause  of  the  seeming  prosperity. 

The  history  of  San  Francisco,  from  the  discovery  of  gold 
to  the  present  time,  shows  conclusively  that  a  purely  metallic 
currency  is  not  free  from  inflations  and  contractions,  but 
more  conspicuously  was  this  shown  from  1852  to  1857.  Up 
to  the  spring  of  1854,  gold  had  been  received  from  the  mines 


OF  SPECIE  PAYMmtS-P' -"-^-ERSITT   |      11 

in  a  constantly  increasing  quantity.  xmor^iB'tr^wTis  from 
three  to  five  per  cent,  per  month.  It  were  an  error  to  infer 
from  this  that  money  was  scarce.  The  plethora  of  money 
sustained  these  high  rates,  and  these  high  rates  caused  a 
plethora  of  money.  Importations  were  great  from  the 
East  and  foreign  countries,  and  had  they  been  paid  for  im- 
mediately the  gold  from  the  mines  would  have  gone  abroad. 
A  large  quantity  was  sent  from  the  State;  but  a  large  quan- 
tity was  allowed  to  remain  for  loan  and  investment,  to  profit 
by  the  high  rates  of  interest.  This  caused  an  inflation — an 
increase  in  the  quantity  of  money.  Wages  were  high  and 
profits  were  magnificent  in  1853.  Speculation  ran  wild,  and 
all  speculations  seemed  to  turn  out  profitably.  The  rising 
tide  of  prices  sustained  the  high  rates  of  interest.  Ordinary 
men  became  pro(}igies  of  business  foresight,  energy,  bold- 
ness, judgment  and  success.  No  magnitude  of  figures 
daunted  them.  They  had  fifty  dollar  "  slugs  "  in  their  pock- 
ets, safes,  and  in  bank,  equal  to  any  conceivable  require- 
ment. Early  in  1854  it  became  evident  that  the  flood-tide 
could  rise  no  higher.  The  sudden  exit  of  Harry  Meiggs 
sounded  the  first  note  of  alarm.  The  tide  began  to  ebb. 
Real  estate  failed  to  realize  anticipated  prices.  Early  in 
1855  the  larger  banks  failed  and  smaller  ones  soon  followed. 
These  events  gave  impetus  to  the  contraction.  Projected 
improvements  were  postponed.  Unfinished  buildings  were 
completed  only  to  remain  unoccupied,  while  others  remained 
unfinished  for  years.  All  business  languished  through  1855, 
1856,  and  1857.  Loans  on  foreign  account  were  collected 
as  they  matured,  and  investments  were  turned  into 
money  and  sent  away.  The  receipts  from  the  mines  were 
largely  required  to  satisfy  this  demand.  Thus,  through 
a  prolonged  system  of  depletion,  the  city  and  State  were 
left  without  sufficient  money  to  keep  up  prices.  In  1856 
real  estate  could  be  bought  at  an  average  of  one  half  the 
prices  reigning  in  1853  and  1854,  and  business  over  the 
State  sufi'ered  from  a  scarcity  of  money. 

These  facts  are  cited  to  show  that  a  gold  currency  is  at- 
tended with  fluctuations;  and  that  in  whatever  form  specie 
payments  may  come,  we  have  no  guaranty  from  past  expe- 
rience against  expansions  and  contractions  of  the  currency, 


1^  ESSAY   ON   RESUMPTION 

with  all  their  attendant  evils :  the  very  evils  so  lavishly  at- 
tributed to  our  present  national  currency  without  justifica- 
tion. A  purely  metallic  currency,  however,  is  out  of  the 
question.  California  is  fast  changing  to  a  gold  note  cur- 
rency, and  paper  forms  the  business  currency  of  every  ad- 
vanced civilized  nation.  Kesumption,  therefore,  means  a 
change  from  our  present  irredeemable  paper  to  a  gold-base 
paper  currency. 

It  may  be  said,  that  the  events  cited  were  exceptional, 
and  peculiar  to  the  early  days  after  the  discovery  of  gold. 
This  answer  will  not  avail.  Inflation  and  contraction  have 
alternately  been  the  monetary  conditions  of  the  State,  and 
at  the  present  time  it  is  experiencing  an  inflation  (increase 
of  the  currency,  if  preferred)  from  the  extraordinary  yield 
of  the  Nevada  mines  during  the  past  two  fears,  and  the  ex- 
traordinary export  of  breadstuffs  during  the  same  period. 
Should  either  of  these  sources  of  money  suddenly  fail,  a 
contraction  would  be  inevitable.  Should  neither  of  these 
sources  fa;l,  contraction  of  the  currency  and  depression  of 
business  will  certainly  follow,  from  the  ever-attendant  con- 
sequences of  inflation  of  a  gold  or  gold-base  currency — ex- 
cessive importations  into  the  State,  causing  an  unfavorable 
balance  of  trade,  to  pay  for  which  the  currency  will  be  sent 
away  in  quantity  exceeding  the  supply,  thus  diminishing 
the  quantity  in  circulation,  thereby  depressing  business. 

The  tendency  of  the  precious  metals  to  flow  to  and  from 
the  countries  using  them  as  their  currency,  or  the  base  of 
their  currency,  is  regarded  as  an  effective  cause  in  equating 
the  commerce  of  nations,  by  causing  an  unfavorable  bal- 
ance of  trade  to  be  followed  by  a  favorable  balance  of  trade. 
But  this  it  does  by  continually  disturbing  prices — causing 
a  rise  and  fall  in  nominal  values  in  every  country  having  an  • 
extensive  foreign  commerce. 

Gold  is  a  constant  traveler  to  and  from  all  commercial 
countries.  As  it  flows  into  a  country  where  it  is  the  base 
of  the  currency,  its  increasing  quantity  enhances  prices, 
and  thereby  stimulates  production  and  commercial  ex- 
changes, rendering  the  people  prosperous;  and  as  it  flows 
from  a  country  its  decreasing  quantity  depresses  prices, 
discouraging  production,  obstructing  exchanges,  paralyzing 


OF  SPECIE  PAYMENTS.  13 

industry,  and  diminishing  the  prosperity  of  the  people. 
These  alternations  of  business  prosperity  and  adversity  are 
undesirable  and  what  every  people  seek  to  avoid.  With 
^his  end  in  view,  resumptionists  wish  to  return  to  specie 
payments.  They  have  learned  from  former  systems  that 
paper  issues  augmented  the  evils  of  fluctuations  in  the  cur- 
rency. But  the  paper  currency  from  which  they  have  de- 
rived their  ideas  was  a  gold-base,  non-legal-tender,  unlim- 
ited paper  currency — a  currency  which  gave  velocity  and 
momentum  to  the  tides  in  prices,  until  they  have  come  to 
entertain  the  idea  that  the  property  of  stimulating  these 
tides  is  inseparable  from  paper  money. 

The  greenback  currency  differs  from  all  former  paper 
money,  in  beii:i2  a  legal  tender — irredeemable — and  its 
quantity  determined  by  statute.  It  is,  therefore,  a  very  dif- 
ferent currency,  and  the  full  measure  of  this  difference 
many  financiers  fail  to  comprehend.  How  an  irredeemable 
currency  can  be  superior  to  a  redeemable  currency,  or  why 
its  legal  tender  character,  while  itself  is  irredeemable,  is  a 
merit  and  not  a  demerit,  or  how  any  benefits  can  be  con- 
ferred upon  the  country  by  these  attributes,  is  more  than 
enters  into  their  philosophy. 

It  is  because  the  greenbacks  are  irredeemable,  and  legal 
tender,  and  their  quantity  determined  by  law,  that  they  con- 
stitute a  superior  currency. 

The  Government  having  the  power  to  determine  the  quan- 
tity of  the  circulating  medium,  by  maintaining  a  uniform 
quantity  per  capita,  can  provide  against  inflation  and  con- 
traction more  effectually  than  by  any  system  of  currency 
based  upon  the  precious  metals  as  the  only  legal  tender 
and  measure  of  nominal  values. 

Population  is  the  true  measure  of  the  quantity  of  money 
required.  The  business  of  the  country  has  its  roots  in  the 
wants  and  supplies  of  the  people.  The  exchanges  to  be 
made  are  of  commodities  for  use  and  consumption.  These, 
when  the  people  are  in  a  state  of  industrial  prosperity,  al- 
ways bear  a  proximate  ratio  to  the  population.  The  capac- 
ity to  produce,  and,  consequently  the  quantity  of  produc- 
tions, are  in  a  proximate  ratio  to  the  population.  The  em- 
ployment of  the  people  and  their  resources  in  production, 


14  ESSAY  ON  RESUMPTION 

and  the  exchange  of  productions  constituting  the  business 
of  the  country,  and  these  in  a  given  state  of  prosperity  be- 
ing measured  by  the  population,  approximately,  therefore 
population  is  the  best  measure  of  the  business  of  the  coun- 
try. This  may  not  seem  to  be  borne  out  when  considered 
with  reference  to  special  localities  or  pursuits  compared 
with  other  localities  or  pursuits ;  but  with  reference  to  the 
country  as  a  whole,  compared  with  itself  at  different  stages 
of  its  growth,  it  will  be  found  approximately  true,  or  true, 
other  things  being  equal.  Instead,  therefore,  of  saying  that 
the  quantity  of  currency  should  always  bear  a  given  ratio  to 
the  population  and  business  of  the  country,  it  is  better  to 
keep  population  alone  in  view,  as  it  is  itself  the  best  meas- 
ure we  have  of  the  aggregate  of  business..  The  amount  of 
business  cannot  be  accurately  measured,  nor  the  amount  of 
money  required  be  determined,  by  the  aggregate  of  nominal 
values ;  because,  the  more  money  in  circulation,  the  greater 
the  nominal  values,  and  the  greater  the  quantity  of  money 
needed. 

What  is  inflation  and  what  is  contraction  ?  An  increase 
of  the  currency  is  not  necessarily  inflation.  Such  an  in- 
crease as  will  not  disturb  prices  is  not  inflation.  An  in- 
crease of  the  currency  so  as  to  keep  pace  with  the  increase 
of  the  population  who  are  to  use  it,  is  not  inflation.  If  in 
1870  we  had  a  quantity  of  currency  in  circulation  equal  to 
$20  per  capita,  amounting  in  the  aggregate  to  $756,000,000 
for  a  population  using  it  of  37,800,000,  and  our  population 
increasing  at  the  rate  of  two  and  a  half  per  cent,  annually, 
shall  become  50,000,000  in  1880,  requiring  $1,000,000,000 
of  currency  to  maintain  the  ratio  of  $20  per  capita,  a  uni- 
form increase  of  the  quantity  of  the  currency  to  this  amount 
at  that  time,  cannot  properly  be  called  inflation.  To  issue 
currency  in  greater  quantity  would  be  inflation.  On  the 
contrary,  if  the  amount  be  fixed,  without  increase  or  dimi- 
nution, while  population  is  increasing  at  the  rate  of  nearly 
twenty-five  per  cent,  each  decade,  that  is  contraction  of  the 
currency  per  capita,  and  in  process  of  time  has  the  same  ef- 
fect as  a  direct  contraction  of  the  aggregate,  though  more 
gradual  and  consequently  less  severely  felt. 

The  duty  of  the  Government,  therefore,  having  found  or 


OF  SPECIE  PAYMENTS.  15 

adopted  a  ratio  of  currency  per  capita,  is  to  maintain  that 
ratio  by  increasing  the  currency  as  the  population  using  it 
increases. 

Specie  payment  causes  us  *Uo  huy  dear  and  sell  cheap.'' 

Specie  payment  suspends  the  law  of  supply  and  demand 
in  its  relation  to  the  price  of  gold  and  silver. 

The  currency  was  highly  inflated  in  1836  and  1856,  and 
prices  were  correspondingly  high.  Foreign  imports  in 
those  years  very  largely  exceeded  our  exports.  Why  was 
there  this  excess  of  imports  ?  Because  we  had  fixed  the 
price  of  gold  and  silver  by  making  the  nominal  dollar — the 
dollar  of  account^the  legal  tender  dollar,  and  the  coin  dol- 
lar of  the  same  relative  fixed  value. 

The  coin  dollar  is  a  fixed  quantity  of  gold  or  silver. 
This  fixed  quantity  of  gold  or  silver — articles  of  commerce 
— was  guaranteed  at  a  given  price  by  specie  payments  and 
specie  legal  tender.  The  nominal  price  of  these  metals 
could  not  rise  correspondingly  with  the  increasing  demand. 
When  our  currency  from  any  cause  whatever  became  in- 
flated, and  other  articles  of  commerce  rose  in  nominal  price, 
corresponding  to  ,the  currency  inflation,  gold  and  silver 
could  not  rise.  They  were  guaranteed  at  the  same  price  as 
before  the  inflation.  Each  dollar  of  account  would  buy  the 
same  weight  of  gold  or  silver.  If,  then,  foreign  nations 
poured  their  products  upon  our  markets  and  sold  them  at 
our  inflated  prices,  for  every  dollar  of  our  inflated  currency 
or  money  of  account  which  they  received,  they  were  guar- 
anteed a  fixed  quantity  of  gold  or  silver,  which  quantity  was 
determined  independently  of  our  inflated  currency.  It  is 
self-evident,  and  history  shows,  that  we  purchased  most 
freely  when  our  prices  were  the  highest,  giving  a  fixed 
quantity  of  gold  and  silver  for  every  nominal  dollar  in  the 
price  of  the  purchase.     This  is  buying  dear. 

Now  let  us  see  how  we  sell  cheap.  Suppose  a  foreign 
merchant  had  sold  in  1836,  or  1856,  a  cargo  of  goods  in  our 
markets,  and  received  his  pay  in  specie-paying  bank  cur- 
rency. The  purchaser  says  to  him :  We  have  a  great  vari- 
ety of  goods  in  our  markets  which  we  would  like  to  sell  you; 


16  ESSAY   ON  EESUMPTION   - 

and  as  we  have  patronized  jou,  we  should  like  to  have  you 
patronize  us  in  return.  We  have  fcotton,  tobacco,  bread- 
stuff, and  many  other  agricultural  and  some  manufactured 
products  largely  in  excess  of  our  demands.  Most  of  these  are 
necessities  of  your  people,  and  you  would  do  well  to  take  a 
cargo  home  with  you." 

The  foreigner  replies:  '*It  is  true,  the  goods  you  have 
named  are  necessities  of  our  people,  and  some  of  them — 
cotton,  tobacco,  and  a  few  others — we  must  obtain  from  this 
country.  I  notice,  however,  that  the  market  prices  of  the 
articles  you  have  named  are  all  very  high.  Many  of  them 
are  higher  than  in  my  own  country.  I  have  found,  by  a  lit- 
tle calculation,  that  breadstuffs  can  be  purchased  on  the 
Baltic  or  Black  seas  much  cheaper  than  here;  indeed,  at 
rates  that  enable  us  to  import  them  into  my  country,  and 
then  export  them  to  this  country  and  sell  them  at  a  profit. 
"Were  your  prices  reasonable  I  would,  with  pleasure,  take  a 
return  cargo.  I  may  take  some  cotton  and  tobacco  to  sup- 
ply current  wants;  but  as  for  the  rest,  I  find  it  most  to  my 
interest  to  change  my  bank  paper  into  gold  and  go  to  other 
markets  where  I  can  buy  cheaper  until  your  surplus  pro- 
ducts come  down  in  price." 

The  domestic  merchant  replies:  ''True,  there  has  been 
a  rise  in  the  prices  of  those  articles,  but  they  are  not 
deemed  unreasonably  high.  There  has  been  a  general  rise 
of  prices,  and  it  is  found  that  articles  of  export  have  not  kept 
pace  with  the  general  rise,  and  particularly  as  compared 
with  the  rise  in  the  prices  of  imports,  they  are  considered 
unreasonably  low  when  compared  with  other  things." 

"  Yes,"  says  the  foreigner,  "but  it  is  not  our  concern  to 
compare  them  with  other  articles  in  this  market.  We  are 
more  concerned  in  comparing  them  with  the  prices  of  the 
same  class  of  articles  in  other  countries,  and  we  find  it  is 
to  our  advantage  to  buy  elsewhere.  When  you  can  sell  as 
cheap  as  we  can  buy  elsewhere  your  surplus  products  will 
be  in  demand."  Thus,  having  the  option  of  gold  or  silver- 
at  a  fixed  price,  he  leaves  our  products  on  our  hands. 

Such  a  system  of  depletion  of  gold  cannot  last  long.  And 
when  we  have  filled  our  country  to  repletion  with  foreign 
goods  at  high  prices,  and  raised  the  prices  of  our  surplus 


OF   SPECIE  PAYMENTS.  17 

products  until  they  fail  to  find  a  foreign  market,  and  coin  is 
taken  instead,  bank  suspension  and  panic,  and  a  shrinkage 
of  prices  follow.  Then  our  domestic  products  are  forced 
down  to  prices  which  enable  them  to  find  a  foreign  market, 
and  thus  we  are  compelled  to  sell  cheap. 

An  irredeemable  currency  remedies  this  by  enabling  us  to  sell 
as  well  as  to  buy  at  our  own  market  prices. 

"With  an  irredeemable  currency  our  imports  are  pur- 
chased at  currency  prices,  and  are  paid  for  in  domestic 
products  at  our  currency  prices  as  affected  by  the  gold 
premium. 

This  may  be  illustrated  by  comparing  the  effect  upon  the 
domestic  prices  of  our  exportable  products  in  1836  or  1856, 
if  the  currency  of  those  years  had  been  an  irredeemable 
legal  tender,  and  the  measure  of  nominal  values — ^in  these 
respects  similar  to  our  present  national  currency  with  the 
effect  under  a  redeemable  currency.  Pursuing  the  former 
illustration,  suppose  the  foreigner  had  sold  his  cargo  in  our 
market  for  one  hundred  thousand  dollars.  This  with  a  re- 
deemable currency  was  equal  to  the  same  quantity  of  gold. 
The  tariff  duties  may  be  estimated  at  $25,000,  gold  value; 
leaving  $75,000,  gold  for  cost  of  production,  transportation 
and  profit.  The  tariff,  being  determined  previously  by  en- 
actment, could  not  rise  correspondingly  with  the  rise  of 
prices  by  inflation,  and  relatively  became  lower  as  they 
became  higher. 

Had  the  currency  been  irredeemable,  the  quantity  in 
circulation  being  the  same,  the  prices  of  imports  would  have 
been  the  same,  and  the  foreigner  would  have  sold  his  cargo 
for  $100,000  currency.  Estimating  the  gold  premium  at 
forty  per  cent.,  as  it  probably  would  have  been  at  least, 
this  would  have  required  $35,000  to  pay  tariff  duties,  leav- 
ing $65,000  to  be  converted  into  gold,  which  gives  $46,429 — 
for  costs  of  production,  transportation  and  profit;  being 
$28,571  in  gold  value  less  than  he  would  have  received  with 
a  redeemable  currency.  A  gold  premium  therefore,  would 
have  checked  the  excessive  importations  during  the  years 
referred  to.  A  gold  premium  also  has  the  effect,  virtually, 
2 


18  ESSAY  ON  EESUMPTION 

of  raising  the  tariff  correspondingly  witli  the  rise  of  prices 
by  inflation.  Let  us  see  how  exportable  products  would 
have  been  affected. 

The  foreigner  having  sold  his  cargo  and  paid  his  duties, 
holds  the  balance  in  bank-bills  convertible  into  gold  on 
demand.  He  finds  the  price  of  wheat  $1.50  a  bushel  and 
flour  $7.50  per  bbl.,  bank  currency  price  equal  to  gold. 
On  the  Baltic  or  Black  Seas  they  would  cost  him  includ- 
ing cost  of  a  passage  across  the  ocean  in  ballast,  wheat 
$1.20  per  bushel  and  flour  $6.00  per  bbl. — reducing  foreign 
coin  to  our  money  denominations.  Liverpool,  Hamburg 
and  Paris  prices  ranging  in  wheat  from  $1.30  to  $1.40  per 
bushel  and  flour  from  $6.50  to  $7.00  per  bbl.  gold  price. 
It  is  very  evident  that  our  prices  of  wheat  and  flour  pre- 
vented their  export,  and  limited  sales  to  the  domestic  de- 
mand, and  the  foreigner  found  it  to  his  advantage  to  turn 
bank  currency  into  gold  and  go  to  the  Baltic  and  Black 
Seas  for  a  supply  of  breadstuffs. 

If  the  currency  had  been  irredeemable  and  gold  at  a 
premium  of  40  per  cent,  as  supposed,  the  currency  price  of 
our  wheat  reduced  to  gold  would  have  been  $1.07  per  bushel, 
and  of  flour  per  bbl.  $5.36.  An  irredeemable  currency 
therefore  would  have  made  it  advantageous  to  the  foreigner 
to  purchase  his  cargo  of  breadstuffs  in  our  markets  at  our 
currency  prices.  The  effect  in  relation  to  all  other  export- 
able articles  is  the  same,  opening  for  them  foreign  markets, 
and  effecting  an  equilibrium  of  imports  and  exports  without 
a  depression  of  our  market  prices  to  effect  this  end.  Thus 
are  we  saved  from  the  necessity  of  buying  dear  and  selling 
cheap  by  an  irredeemable  currency. 

It  may  be  answered  that  the  reduction  of  the  currency 
price  of  exportable  products  only  shows  that  we  really  sell 
our  products  cheap,  and  that  nothing  is  gained  by  s'elling 
at  higher  prices  in  what  is  called  a  depreciated  currency, 
and  that  the  difference  in  the  currency  and  gold  prices  is 
the  measure  of  the  currency  depreciation. 

This  is  a  fallacy.  It  assumes  that  the  consumers  of  the 
imported  cargo  and  producers  of  the  exported  cargo  are  not 
benefited  by  the  gold  premium.  This  assumption  cannot 
be  separated  from  its  corollary,  that  the  interests  of  the 


I 

OF  SPECIE  PAYMENTS.  19 

foreigner  who  sold  his  cargo  of  imports  and  purchased  his 
cargo  of  exports  were  not  injured  by  the  gold  premium. 
Were  his  interests  injured  by  the  gold  premium"?  With  a 
redeemable  bank  currency  his  $100,000  less  import  duties 
left  him  $75,000.  To  pay  this  in  products  we  could  not 
expect  to  receive  more  than  they  would  cost  elsewhere,  in- 
cluding cost  of  passage  in  ballast;  wheat  $1.20  per  bushel, 
and  flour  $6.00  per  bbl.  This  would  allow  him  to  purchase 
62,500  bushel  of  wheat  or  12,500  bbls.  of  flour.  With  an 
irredeemable  currency  and  gold  premium  and  prices  as 
supposed — his  $100,000  currency  less  $35,000  to  convert 
into  gold  to  pay  duties  would  leave  him  $65,000,  which 
converted  into  gold  is  equal  to  $46,429  which  would  enable 
him  to  purchase  43,400  bushels  of  wheat  at  $1.07  (equal  to 
$1.50  currency)  or  8662  bbls.  of  flour  at  $5.36  gold  price 
(equal  to  $7.50  currency)  or  about  $28,000  less  in  gold 
values  than  with  a  redeemable  currency.  And  inasmuch 
as  the  consumers  of  the  imports  pay  the  same  amount  under 
either  condition  of  the  currency  it  is  a  benefit  in  the  first 
instance  to  the  producers  of  exports,  and  is  shared  with  the 
consumers  through  the  operations  of  the  laws  of  trade,  by 
enabling  the  export  producers  to  purchase  more  largely 
and  pay  better  prices  to  manufacturing  consumers. 

The  estimates  of  prices  and  quantities  in  the  foregoing 
are  only  illustrative ;  though  they  approximate  to  the  facts. 
To  show,  however,  that  the  facts  of  history  sustain  the  fore- 
going statements  and  deductions,  the  following  extracts  are 
taken  from  the  Keport  of  the  Secretary  of  the  Treasury  for 
the  year  1865  : 

**A  Statement  of  the  hank  note  circulation  of  the  country  at 
various  periods  of  highest  and  lowest  issues  prior  to  the  laar; 

"January,  1830— $61,324,000  January,  1856 -$195,747,950 

1835—103,692,495  "         1857—  214,778,822 

1836—140,301,038  ««         1858—  155,208,344 

1837—149,185,890  '«         1860—  207,102,000 

';        18  i3—  58,564,000 

"  It  will  be  noticed  by  this  statement  that  the  bank  note  circulation  of  the 
United  States  increased  from  $61,324,000  to  $149,185,890  between  the  1st  of 
January,  1830,  and  the  1st  of  January,  1 837,  in  which  latter  year  the  great 
financial  collapse  took  place  ;  fell  from  $149,185,890,  in  1837,  to  $58,564,000 


20  ESSAY  ON  RESUMPTION 

in  1843,  and  rose  to  $214,778,822  on  the  Ist  of  January,  1857,  in  which  year 
the  next  severe  crisis  occurred  ;  falling  that  year  to  $155,208,344,  and  rising 
to  $207,102,^00  on  the  1st  of  January,  1860.         «         *         *         * 

"The  expansion  of  1835  and  1836,  ending  with  the  terrible  financial  col" 
lapse  of  1837,  from  the  effects  of  which  the  country  did  not  rally  for  years, 
was  the  consequence  of  excessive  bank  circulation  and  discounts. 

*  *  *  "These  were  years  of  great  inflation,  the  effects  of  which  have 
already  been  referred  to — the  revulsion  of  1837  not  only  producing  great  im- 
mediate embarrassment,  but  a  prostration  which  continued  until  1843,  at  the 
commencement  of  which  year  the  bank  note  circulation  amounted  only  to 
$58,564,000,  deposits  to  $56,168,000,  loans  $254,544,000 -flour  having  de- 
clined in  New  York  from  $10.25  per  barrel  on  the  1st  of  January,  1837,  to 
$4.69  on  the  1st  of  Jai.iuary,  1843,  and  other  articles  in  about  the  same  pro- 
portion. 

"The  reaction  in  1857  was  severe,  but  from  reasons  before  stated,  less  dis- 
astrous and  protracted." 

It  will  be  seen,  by  the  foregoing  extract  and  statistics, 
that  a  return  to  specie  payments  would  be  a  return  to  con- 
stant vicissitudes  in  the  quantity  of  money  in  circulation 
and  monetary  conditions.  But  even  these  statistics  fail  to 
show  the  rapidity  of  the  expansions  and  contractions  of  the 
currency.  Nearly  all  the  increase  in  the  quantity  of  cur- 
rency occurring  from  January  1st,  1830,  to  January  1st, 
1837,  really  occurred  in  the  latter  three  years  after  the  re- 
moval of  the  government  deposits  from  the  United  States 
Bank  by  Jackson.  And  nearly  all  the  contraction,  includ- 
ing depreciation,  of  the  currency  shown  to  have  occurred 
in  the  five  years  succeeding  the  1st  of  January,  1837,  really 
and  virtually  occurred  within  six  months  from  that  period, 
the  quantity  oscillating  near  the  lower  point  through  the 
remainder  of  the  five  years ;  and  the  same  is  true  in  relation 
to  the  great  decline  in  the  price  of  flour  and  other  products, 
the  decline  occurring  in  the  first  six  months  of  1837. 

Balance  of  trade  and  foreign  exchange. 

With  a  gold-base  currency,  if  our  imports  exceed  our  ex- 
ports, exclusive  of  the  precious  metals,  the  excess  is  a  bal- 
ance of  trade  against  us.  We  purchase  more  than  we  sell, 
and  the  difference  is  either  a  gold  payment  or*  a  gold  de- 
mand— nearly  always  the  latter.  The  precious  metals  are 
not  regarded  as  exports  or  imports,  but  as  payment,  be- 
cause, being  the  basis  of  the  circulating  medium,  their  ex- 


OF  SPECIE  PAYMENTS.  21 

portation  or  importation  has  a  contrary  effect  from  that  of 
the  importation  or  exportation  of  any  other  article  of  com- 
merce. 

During  the  creation  of  a  foreign  debt  through  an  unfavora- 
ble balance  of  trade  the  country  is  prosperous.  It  occurs 
during  inflation  of  the  currency,  which  gives  rise  to  an 
expanded  system  of  credit  based  upon  general  business  pros- 
perity or  speculative  enterprise.  Prices  are  generally  high 
so  as  to  make  our  market  a  good  one  for  foreigners  to  sell 
in  and  a  poor  one  for  them  to  buy  in.  It  is  a  certain  indi- 
cation that  a  re-action  must  come;  and  if  the  bklance  of 
trade  against  us  be  great  or  long  continued,  the  re-action 
becomes  a  calamity.  This  balance  against  us  being  in  the 
form  of  a  demand  for  gold  at  a  fixed  price,  when  the  day  of 
payment  comes,  the  gold,  which  forms  the  basis  of  our  cur- 
rency, is  sent  abroad;  contracting  the  currency,  inducing 
a  panic,  a  shrinkage  of  prices  and  general  bankruptcy.  At 
length  our  market  prices  reach  a  point  so  low  that  foreign- 
ers cannot  sell  us  their  products  to  advantage,  thus  our 
imports  fall  off.  At  the  same  time  they  find  their  opportu- 
nity to  buy  our  products  cheap,  which  increases  our  exports 
and  turns  the  balance  of  trade  in  our  favor,  when  the  cur- 
rent of  gold  begins  to  return. 

It  will  be  seen  by  this  analysis  that  the  balance  of  trade 
in  our  favor,  or  against  us,  is  only  currency  expansion  or 
contraction  from  another  point  of  view.  It  will  be  seen, 
also,  that  prosperous  business  induces  a  balance  of  trade 
against  us,  and,  that  with  specie  payments,  we  have  no  means 
of  equating  this  unfavorable  balance  of  trade  except  through 
a  serious  depression  of  prices  and  business,  and  often 
through  the  direful  calamity  of  general  bankruptcy. 

An  unfavorable  balance,  though  in  the  midst  of  prosperi- 
ty, is  regarded  as  undesirable,  because  it  is  portentous  of 
business  depression  through  a  contraction  of  the  currency : 
while  a  balance  of  trade  in  our  favor  is  always  regarded  as 
desirable,  though  often  brought  about  by  great  business 
depression ;  bcicause  it  is  a  cause,  as  well  as  an  indication, 
of  an  increase  of  the  currency  and  revival  of  business. 

Sometimes,  it  is  true,  that  superabundant  crops  of  our 
staple  exports,  or  unfavorable  crops  abroad  ^iye  a  balance 


22  ESSAY  ON  EESUMPTION 

of  trade  in  our  favor,  as  in  the  case  of  the  wheat  crop  of 
California  the  past  two  years.  But  much  more  is  usually 
attribatecl  to  this  cause  than  is  properly  due  to  it.  If  the 
crops  in  California  continue  equally  abundant  they  will  fail 
to  give  her  a  favorable  balance  of  trade.  They  have  served 
to  expand  the  volume  of  her  currency,  which  is  attended 
with  increased  activity  in  business,  and  increasing  importa- 
tions into  the  State,  which  will  continue  to  increase  until 
they  exceed  her  exports,  when  reaction  and  depression  will 
inevitably  follow. 

The  rate  of  foreign  exchange  is  held  to  be  a  matter  of 
much  importance  to  the  business  of  the  country.  In  itself, 
the  difference  of  exchange  is  a  matter  of  but  little  moment : — 
the  extreme  variation  in  time  of  peace  being  but  two  or 
three  per  cent. — the  expense  of  transporting  the  precious 
metals.  It  is  important  mainly  as  an  indication  of  the  c\ir- 
rent  of  gold  and  silver,  whether  to  or  from  our  country. 
"When  foreign  exchange  is  high,  and  continues  high,  it  is  an 
indication  that  the  current  of  gold  is  from  our  country;  and 
a  contraction  of  the  currency  and  a  depression  of  prices  is 
apprehended.  When  it  is  low  it  indicates  that  the  current 
of  gold  is  toward  this  country,  or  at  least,  that  the  current 
from  our  mines  to  foreign  countries  is  not  stimulated  by 
any  extraordinary  demand;  and  consequently  a  drain  of 
gold,  a  contraction  of  the  currency  and  business  depression 
are  not  anticipated.  Hence,  high  rates  of  exchange  were 
regarded  with  dread,  while  low  rates  alwa3^s  inspired  confi- 
dence and  hope.  The  rate  of  exchange  indicates  a  favor- 
able or  unfavorable  balance  of  trade. 

I  now  invite  particular  attention  to  a  most  important  fact, 
or  effect,  resulting  from  an  irredeemable  currency;  a  fact 
that  is  clearly  understood  by  but  few,  even  of  those  who 
have  made  finance  a  study : 

An  h'redeemdble  currrency  reverses  all  the  indications  of  a 
favorable  or  unfavorable  balance  of  trade  and  of  high  or  low 
rates  of  foreign  exchange. 

This  is  the  sphinx  of  the  financial  question.  The  price 
of  gold — the  premium — has  become  the  best  indication  of 


OF  SPECIE  PAYMENTS.  23 

the  business  prospect.  And,  contrary  to  the  common  opin- 
ion, a  rise  of  gold  is  a  favorable  indication,  and  a  fall  of  gold 
is  the  reverse. 

A  rise  in  the  price  of  gold  is  found  to  accompany  high 
rates  of  foreign  exchange.  Financiers  and  business  men 
who  have  not  learned  that  the  indications  of  foreign  ex- 
change have  been  reversed  by  an  irredeemable  currency, 
continue  to  regard  high  rates  of  foreign  exchange  as  an 
indication  unfavorable  to  business;  and  have  come  to  regard 
its  accompanying  j&rmness  of,  or  rise  in  the  price  of  gold 
as  having  the  same  effect,  and,  consequently,  with  forebod- 
ing of  evil;  also,  as  affecting  or  reflecting  upon  the  credit 
of  the  government.  A  fall  in  the  price  of  gold,  though 
really  unfavorable  to  business,  is  by  a  large  majority  of  the, 
people  regarded  as  a  favorable  indication;  because,  first,  it 
is  in  the  line  of  resumption,  which  nearly  everybody  ap- 
pears to  desire  without  knowing  why;  and,  second,  because 
it  is  accompanied  by  low  rates  of  exchange  which  still  con- 
tinue to  be  regarded  as  a  certain  indication  favorable  to 
business.  This  continual  dependence  upon  the  old  guide 
boards  which  have  been  reversed,  leads  the  Eesumptionists 
to  set  their  faces  in  the  wrong  direction,  and  though  they 
realize  that  it  is  a  "hard  road  to  travel,"  they  are  confident 
that  there  is  '*milk  and  horey"  at  the  end  of  their  journey. 

This  reversal  of  the  "indications,"  as  before  stated,  is 
owing  to  the  precious  metals  having  changed  their  relations 
to  commerce  and  business,  by  being  demonetized  by  an 
irredeemable  currency.  Their  export  now  has  the  same 
effect  as  that  of  any  other  product  and  conduces  to  the  pros- 
perity of  the  country.  It  does  not  diminish  our  currency — 
it  simply  tends  to  raise  the  price  of  gold  correspondingly 
with  the  demand.  This  demand  for  and  export  of  gold  is 
to  effect  an  equation  of  trade.  When  the  demand  had 
effected  a  rise  in  the  price  of  gold,  it  is  thereby  turned  to 
other  exportable  products  until  the  increased  demand  for 
them  raises  tbeir  price  also,  when  the  demand  returns  again 
to  gold.  The  importation  of  gold  adds  to  our  domestic 
supply,  depressing  its  price  and  thereby  attracting  the  de- 
mand for  exports  to  gold  and  leaving  other  products  until 


24  ESSAY  ON  RESUMPTION 

their  prices  are  depressed  in  sympathy  with  gold,  when 
again  they  share  the  common  demand. 

With  an  irredeemable  legal-tender  currency,  whatever  he 
the  magnitude  of  our  imports  on  the  basis  of  domestic  values,  our 
exports  must  he  of  an  equal  or  greater  magnitude,  or  the  differ- 
ence loill  he  a  foreign  debt,  to  be  paid  at  a  future  time  by 
exports  on  the  same  basis  of  values. 

If  our  imports  for  a  time  exceed  our  exports  the  differ- 
ence is  a  foreign  debt.  This  debt  is  in  all  the  various  forms 
of  national,  state,  county,  city,  and  corporation  bonds  and 
securities:  also  in  personal  and  mercantile  credits.  These 
latter  are  usually  of  comparatively  limited  amount  and  of 
a  temporary  character,  while  the  former  are  of  great  magni- 
tude and  of  a  more  permanent  character. 

Our  securities  sold  abroad  have  all  the  relations  to  com- 
merce of  exports.  They  take  the  place  of  exports  in  effect- 
ing for  the  time  being  an  equation  of  trade.  They  are  in 
direct  competition  with  all  other  exports  and  depress  their 
prices,  and  might  be  classed  as  exports;  and  when  they  re- 
turn for  payment  or  purchase  they  should  be  regarded  as 
imports,  as  they  must  then  be  paid  for  or  equated  by- ex- 
ports. But  their  effect  upon  business  is  different  from  that 
of  any  other  class  of  exports  or  imports,  and,  for  the  pur- 
pose of  considering  the  effects  of  their  exportation  and 
return  upon  the  prices  of  exportable  commodities  and  upon 
business  and  money  distribution,  I  shall  treat  them  as  for- 
eign indebtedness  in  accordance  with  the  common  idea. 

What  is  the  magnitude  of  this  foreign  indebtedness  ?  It 
is  probably  more  than  two  billions ;  it  may  be  not  less  than 
three  billions.  Whatever  is  its  precise  amount  it  is  enor- 
mous. The  great  wonder  has  been  how  the  country  holds  up 
under  it  and  seems  to  prosper.  It  is  generally  predicted 
that  the  interest  will  become  unendurable,  and  that  the 
principal,  when  demanded,  will  be  our  utter  ruin;  that  in 
that  evil  day  there  will  be  a  universal  *' break-up;"  and 
panic,  stagnation,  paralysis  and  bankruptcy  will  reign 
supreme.  Were  we  to  resume  specie  payments,  and  adopt 
a  specie  basis,  we  should  thereby  invite  these  calamities  from 
our  foreign  indebtedness. 


OF  SPECIE  PAYMENTS.  25 

Our  irredeemable  legol-teiider  currency  saves  us  from  these 
evil  results. 

We  are  a  debtor  nation,  and  shall  continue  to  be,  so  long 
as  we  give  a  larger  per  centage  of  interest  and  profits  on 
loans  and  investments  than  is  common  in  other  countries. 
This  is  our  chronic  condition,  the  end  of  which  no  man  can 
see.  In  view  of  this  fact,  our  irredeemable  legal-tender 
currency  is  a  blessing — it  is  the  talisman  that  makfes  us 
master  of  the  situation — the  shield  that  saves  us  from  im- 
pending danger — the  wand  that  changes  a  curse  to  a  bene- 
faction.    Let  us  consider  how  this  is: 

If  we  estimatethe  interest-bearing  foreign  debt  in  the  form 
of  permanent  securities,  at  two  billions,  the  annual  interest  as 
at  six  per  cent.,  would  amount  to  $120,000,000.  The  princi- 
pal is  a  gold  debt,  and  the  interest  is  a  gold  current  accruing 
obligation.  This  latter  amounts  to  about  twice  the  product 
of  our  mines.  It  is  a  constant  demand  for  our  precious  met- 
als, and  drains  our  country  of  them,  but  it  cannot  drain 
from  us  our  currency  nor  affect  its  volume.  Business  is  not 
only  not  paralyzed  by  this  drain  of  gold,  but,  on  the  contrary, 
is  stimulated  and  improved  by  it.  Our  domestic  product 
of  the  precious  metals  only  half  supplies  this  demand. 
If  it  seeks  more  it  raises  their  price.  This  causes  it  to 
seek  other  of  our  products  in  our  markets  as  its  only  alter- 
native, thus  finding  an  outlet  and  market  for  our  surplus 
products — while  our  currency  remains  within  our  own  coun- 
try, undisturbed  in  volume,  fulfilling  its  beneficent  purposes : 
and  the  effect  the  payment  of  this  interest  has  upon  general 
business  is  to  quicken  its  activities  and  give  firmness  to  our 
market  prices.     Thus  of  the  interest,  what  of  the  principal? 

The  aggregate  of  our  foreign  debt  will,  probably,  not  be 
much  diminished  for  a  generation  to  come.  It  may  be  in- 
creased, but  it  is  not  likely  to  be  increased  to  any  consid- 
erable extent  or  so  rapidly  as  it  has  been  in  the  last  decade. 
Old  debts  will  be  paid  and  new  debts  created,  continuing 
the  aggregate  as  large  or  larger  than  at  present.  To  pre- 
serve the  aggregate  as  it  is,  our  exports  must  exceed  our  im- 
ports an  amount  equal  'io  the  interest  of  the  indebtedness.    A 


26  ESSAY  ON  RESUMPTION 

greater  excess  of  exports  will  diminish  the  aggregate;  a  less 
excess  of  exports  will  increase  it. 

Our  foreign  indebtedness  may  be  paid  directly  by  the 
contracting  parties  at  maturity,  or  indirectly  by  American 
purchases  of  these  securities  for  investment  until  they  ma- 
ture. In  either  case,  the  general  effect  upon  business  will 
be  the  same.  Suppose  a  hundred  millions  should  mature 
or  be  purchased  annually,  the  effect  of  their  payment  would 
be  the  same  upon  business  as  that  of  the  payment  of  the 
interest  before  illustrated — to  quicken  into  greater  activity 
all  our  industries  by  creating  a  greater  demand,  and  open- 
ing a  wider  outlet  and  market  for  all  our  exportable  com- 
modities, giving  firmness  and  buoyancy  to  all  nominal  and 
market  prices.  Should  the  amount  be  two  hundred  mil- 
lions, or  three  hundred  millions,  the  effect  would  be  the 
same,  but  greater  in  degree.  Enterprise  and  industry 
would  be  the  more  stimulated.  The  increased  taxation  on 
the  part  of  the  general  government,  states,  counties  or 
cities,  rendered  necessary  to  cancel  their  maturing  bonds, 
would  be  compensated  by  the  increased  activity  and  buoy- 
ancy of  business.  Ah  increased  product  of  wealth  would  result 
from  this  increased  business,  activity  sufficient  to  fill  the  va- 
cancies created  by  the  exportation  of  commodities  to  liqui- 
date the  matured  or  purchased  indebtedness.  Thus  the 
country  would  exert  a  little  more  energy  and  muscle,  but 
would  be  no  poorer  during  or  after  the  payment  than  be- 
fore. 

While  we  retain  our  legal  tender  currency,  certain  com- 
mercial contingencies  that  may  arise  would  have  a  very  dif- 
ferent effect  upon  our  business  prosperity  from  that  which 
would  be  experienced  if  we  resume  specie  payments.  Should 
there  be  a  serious  commercial  crisis  in  England  or  Germany, 
the  holders  of  our  securities  might  wish  to  turn  them  into 
money  as  soon  as  possible  to  relieve  their  pressing  necessi- 
ties. In  such  a  case,  two  or  three  or  four  hundred  millions, 
more  or  less,  might  suddenly  be  returned  and  placed  upon 
our  markets  to  be  sold  for  what  they  would  bring.  Tl  e 
placing  of  large  quantities  upon  our  market  would  reduce 
their  price  (in  our  market)  by  their  superabundance.  When 
they  had  been  sold  at  a  discount  for  currency,  this  currency 


OF  SPECIE  PAYMENTS.  27 

must  be  converted  into  gold  or  other  commodities,  which 
from  this  excessive  demand  would  rise  in  price.  Thus  we 
should  buy  our  securities  at  a  discount,  and  pay  for  them 
with  domestic  products  at  a  premium.  TJiis  would  be  buy- 
ing cheap  and  selling  dear — reversing  the  condition  under 
specie  payments. 

While  we  retain  our  currency  we  are  strong  in  our  inter- 
national relations.  The  shrewd  leaders  of  public  opinion 
in  foreign  countries  will  be  wary  how  they  create  a  panic 
among  their  people  against  our  credit  or  our  securities  by 
warlike  menace  or  otherwise.  Their  interests  are  on  the 
side  of  peace  and  fair  dealing.  If  they  depreciate  our  se- 
curities and  throw  them  back  upon  us  for  redemption  before 
maturity,  their  own  people  only  will  have  their  fingers  burnt. 
We  can  stand  it  if  they  can.  How  much  of  our  success  may 
have  been  due  to  these  considerations  in  our  past  negotia- 
tions !     Why  should  we  surrender  this  masterly  position  ? 

Kesumption  of  specie  payments  would  reverse  all  these 
conditions.  To  pay  the  annual  interest  would  drain  us  of 
the  precious  metals.  The  basis  of  the  currency — gold  and 
silver — having  been  drawn  from  us,  the  currency  resting 
upon  it  must  suffer  contraction  until  the  prices  of  our  ex- 
ports could  find  a  profitable  market  abroad.  Low  nominal 
values  would  probably  be  a  chronic  condition.  I  say  prob- 
ably, because  high  nominal  values  might  be  maintained,  by 
enacting  a  sufficiently  high  tariff.  But  if  we  have  not  the 
sagacity  to  see  the  disadvantages  of  resumption,  we  may  not 
have  the  sagacity  to  see  the  advantages  of  a  high  tariff  under 
resumption.  A  prevalence  of  low  prices  would  relatively 
augment  our  indebtedness.  A  financial  panic  in  England 
or  Germany  would  bring  upon  us  universal  bankruptcy — in 
several  ways.  Business  being  paralyzed  there,  the  princi- 
pal market  of  our  leading  exports  would  be  virtually  closed ; 
at  the  same  time  payment  would  be  demanded  for  all  our 
matured  and  mercantile  foreign  indebtedness,  and  our  un- 
matured securities  would  be  returned  to  our  markets.  All 
these  causes  would  contribute  to  rapidly  contract  our  cur- 
rency and  shrink  our  nominal  values.  All  business  would 
be  blocked  and  general  bankruptcy  would  be  inevitable. 
With  specie  payments  the  remotest  hamlet  in  the  far  west 


28  ESSAY  ON  RESUMPTION 

would  be  directly  affected  by  every  movement  of  the  bank- 
ers of  the  great  commercial  cities  of  western  Europe.  If 
tlie  Bank  of  England  should  raise  its  rate  of  interest  as  it 
did  last  year,  in  the  course  of  a  few  months,  from  three  to 
seven  per  cent.,  it  would  seriouslj^  and  detrimentally  affect 
business  and  the  prices  of  products — especially  exportable 
products  —  all  over  our  country.  The  Bank  of  England 
could  depress  our  markets,  just  when  we  have  crops  to  sell, 
by  raising  the  rates  of  exchange  against  us,  and  by  raising 
her  rates  of  interest  and  curtailing  her  loans  —  creating  a 
temporary  tightness  or  scarcity  of  money  and  alarm  until 
our  products  could  be  purchased  at  low  prices,  when  she 
could  lower  her  interest  and  extend  her  loans  —  reviving 
confidence  and  leading  to  an  extension  of  credit  to  our  im- 
porting merchants  (mostly  foreign  agents),  who  in  turn 
would  extend  credits  to  our  purchasers,  who  would  thus  be 
induced  to  purchase  imports  on  a  rising  market  until  our 
crops  were  ready  to  move  forward  again,  when  the  process 
would  be  repeated. 

With  specie  payments  the  burden  of  finding  gold  to  make 
foreign  payments  is  upon  us,  and  if  too  'scarce  at  home  it 
must  be  sought  abroad  under  any  or  every  adverse  circum- 
stance. In  all  gold-base  currency  countries  gold  becomes 
periodically  too  scarce  to  make  the  necessary  payments  to 
balance  accounts,  when  it  must  be  sought  abroad  under 
great  sacrifices.  All  nations,  at  such  times,  are  dependent 
and  harassed.  And  a  nation  like  ours,  that  is  constantly 
in  debt  to  foreign  countries,  is  constantly  dependent  upon 
the  monetary  condition  of  those  countries  that  hold  its  ma- 
turing and  interest-bearing  securities — and  is  largely  de- 
pendent^upon  their  forbearance  and  good  will. 

With  specie  payments  an  enemy  might  injure  us  seriously 
simply  by  a  menace  of  war,  which  would  have  the  effect  of 
returning  to  our  markets  our  foreign  securities  in  such  vol- 
ume as  to  suddenly  drain  away  our  precious  metals,  leading 
to  a  sudden  contraction  of  our  currency — a  shrinkage  of 
prices  and  panic.  If  severe,  the  government  itself  might 
be  forced  to  suspend  its  guaranty  of  specie  redemption  of 
a  bond-secured  gold-note  currency.  In  such  a  state  of 
things,  the  only  currency  in  the  hands  of  the  people  would 


OF  SPECIE  PAYMENTS.  29 

pass  at  a  discount,  not  being  a  legal-tender.  The  govern- 
ment might  refuse,  for  taxes,  the  currency  it  had  guaran- 
teed— or  it  might  accept  it  at  par,  and  disburse  it  at  a  dis- 
count; and,  to  make  up  the  deficiency,  levy  more  taxes,  or 
resort  to  more  loans.  Snch  periods  germinate  to  seeds  of 
repudiation,  discontent  and  anarchy. 

To  recapitulate,  we  have  shown  that  resumption  is  delu- 
sive— that  though  it  exists  with  prosperity,  it  is  not  only  no 
guaranty  against,  but  is  necessarily  followed  by  adversity. 
That  it  necessarily  involves  expansion  and  contraction  of 
the  currency.  That  this  is  the  case  whether  we  have  the 
old  State  banks,  the  old  U.  S.  Bank  System,  or  a  pure  me- 
tallic currency,  or  a  bond-secured  gold-n^te  currency.  That 
it  involves  necessarily  an  unfavorable  balance  of  trade  by 
imports  at  high  prices  to  be  equated  only  through  an  excess 
of  exports  at  low  prices,  causing  us  to  buy  dear  and  sell 
cheap — that  these  results  are  inseparable  from  a  gold-base 
currency.  That  it  would  make  our  foreign  indebtedness  a 
chronic  burden,  and  an  instrumentality  of  periodical  op- 
pression, and  at  all  times  a  menace  in  the  hands  of  foreign 
nations  to  humble  our  national  pride,  and  to  control  our 
diplomacy;  that  by  making  our  currency  in  unison  with 
that  of  foreign  countries,  and  placing  our  business  on  the 
same  basis,  we  should  surrender  the  monetary  indepen- 
dence we  now  have,  and  place  our  business  prosperity  in 
irretreivable  subjection  to  the  contingencies  or  machina- 
tions which  control  or  direct  the  monetary  conditions  and 
movements  of  the  great  money  center  of  the  world — Lon- 
don— Lombard  street,  and  the  Bank  of  England.  That,  on 
the  contrary,  our  irredeemable  legal-tender  currency — being 
subject  to  law,,  enables  the  government  to  determine  its 
quantity  at  all  times,  and  to  issue  it,  and  continue  it  in  a 
fixed  ratio  to  the  population  using  it — establishing  a  uni- 
form amount  per  capita — thus  establishing  a  more  steady 
and  uniform  measure  of  nominA,l  values  of  long  duration, 
beyond  the  term  of  ordinary  contracts,  than  is  possible 
with  a  metallic  or  gold  currency.  That  it  enables  us  to 
purchase  our  imports  and  sell  our  exports  at  our  own  mar- 
ket prices,  measured  by  a  uniform  currency. 

That  it  effects  an  equation  of  trade  with  foreign  countries, 


30  ESSAY  ON  RESUMPTION 

without  affecting  the  volume  of  our  currency,  or  disturbing 
unfavorably  our  market  prices.  That  it  renders  us,  in  a 
great  measure,  independent  of  the  monetary  conditions  of 
other  nations.  That  it  subjects  the  precious  metals,  like  all 
other  commodities,  to  the  law  of  demand  and  supply.  That 
it  renders  our  foreign  indebtedness  easy  to  be  borne,  by  en- 
abling us  to  pay,  both  interest  and  principal,  in  domestic 
products,  at  our  market  prices,  and  not  in  currency,  thus 
leaving  our  currency  undiminished  in  volume,  to  preserve 
the  measure  of  values  unaffected  except  by  the  demand  for 
our  products;  and  that  it  utterly  disables  any,  or  all,  foreign 
nations  from  injuring  our  interests,  or  business  prosperity, 
or  limiting  our  independence,  or  humbling  our  pride  by 
any  vindictive  attempt  to  depress  our  national  or  interna- 
tional credit. 

I  have  said  that,  with  our  irredeemable  currency,  what- 
ever be  the  magnitude  of  our  imports  on  the  basis  of  domes- 
tic values,  our  exports  must  he  of  an  equal  magnitude  on.  the 
same  hasis  of  value,  or  the  difference  will  be  a  foreign  debt 
to  he  paid  hy  exports  on  the  basis  of  domestic  values. 

I  wish  to  further  consider  this  proposition,  partly  to  bet- 
ter define  my  meaning,  but  more  particularly  to  draw  atten- 
tion to  the  manner  in  which  this  principle  affects  business 
prosperity,  and  the  extent  of  its  influence.  When  I  afiirm 
that  our  imports  and  exports  are  based  upon  domestic 
prices,  I  am  not  to  be  understood  to  affirm,  that,  they  bear 
no  relation  to  foreign  prices,  or  that  they  are  unaffected  by 
foreign  prices.  There  is  always  a  direct  relation  between 
domestic  and  foreign  prices  through  the  medium  of  the  gold 
premium.  And  the  state  of  foreign  markets,  as  prices  in 
them  rise  or  fall,  affects  directly  the  domestic  price  of  all 
exportable  commodities,  and  that  of  many,  if  not  all  of  our 
imports.  My  endeavor  is  to  contrast  the  conditions  under 
wiiich  our  imports  are  purchased  and  exports  sold  in  our 
markets  with  an  irredeemable  currency,  with  those  under 
which  imports  are  purchased  and  exports  sold  with  a  gold, 
or  gold-base  paper  currency.  With  an  irredeemable  cur- 
rency, if  our  market  prices  are  inflated  the  premium  on  gold 
is  the  measure  of  that  inflation;  and  the  foreign  merchant, 
when  he  sells  his  goods  at  our  inflated  prices,  must  rebate 


OP  SPECIE  PAYMENTS.'  31 

a  percentage  of  those  prices  in  proportion  to  the  inflation 
when  he  converts  his  currency  into  gold  by  suffering  the 
loss  of  the  difference  between  gold  and  currency,  if  he  take 
away  his  pay  in  gold.  If  he  chooses  to  take  some  other  of 
our  exportable  commodities,  he  finds  them  ranging  at  prices, 
nominally  higher,  perhaps,  then  in  the  country  to  which  he 
wishes  to  take  them.  But,  as  he  must  rebate  nis  currency 
to  convert  it  into  gold,  he  has  only  to  rebate  our  currency 
prices  of  other  commodities  in  the  same  ratio,  to  convert 
them  into  gold  prices,  from  which  he  determines  whether 
he  will  buy  gold  or  some  other  exportable  commodity,  or  a 
bill  of  exchange.  Thus  our  currency  prices,  for  the  purposes 
of  commerce,  are  converted  into  gold  by  the  rebate  of  the 
gold  premium. 

The  excess  of  imports  over  exports,  less  the  interest  on 
the  foreign  indebtedness,  is  equal  to  the  augmentation  of 
foreign  indebtedness. 

The  effects  of  the  increase  of  foreign  indebtedness  are 
very  different  under  an  irredeemable  legal  tender  currency 
from  those  under  a  gold-base  currency.  This  difference  has 
its  peculiar  effects  upon  commerce,  the  gold  premium,  the 
relative  prices  of  different  classes  of  domestic  products,  and 
upon  different  sections  and  pursuits. 

The  great  excess  of  imports  over  exports  during  the  last 
decade  is  owing  to  the  great  increase  of  our  foreign  indebted- 
ness. 

Perhaps  the  reader  will  say  I  have  taken  the  effect  for  the 
cause.     Let  us  see. 

During  the  rebellion  nearly  all  our  national  bonds  were 
taken  by  our  own  people ;  also,  to  a  great  extent,  our  rail- 
road bonds  of  roads  constructed  since  the  commencement 
of  the  war,  and  probably  not  less  than  eighty  or  ninety  per 
cent,  of  all  our  securities,  national.  State,  county,  city  and 
corporation,  issued  during  the  war,  remained  in  domestic 
hands  at  its  close.  Where  are  they  now?  Would  it  be  too 
much  to  estimate  that  fifty  per  cent,  of  all  American  securi- 
ties issued  since  the  commencement  of  the  war,  have,  since 
its  close,  passed  to  foreign  hands?  And  if  not,  can  the 
amount  be  less  than  $1,500,000,000?  Before  the  war  the 
foreign  indebtedness  was  estimated  at  more  than  $500,000,- 


32  ESSAY  ON  RESUMPTION 

000.  If  we  estimate  that  $500,000,000  were  added  during 
the  war,  and  $1,500,000,000  from  its  close  to  the  close  of 
1873,  we  should  have  an  aggregate  of  $2,500,000,000  as  the 
sum  of  our  foreign  indebtedness.  For  the  want  of  reliable 
statistics  I  can  only  approximate  the  amount,  and  according 
to  the  reader's  information  it  may  be  deemed  too  high  or 
too  low,  and  can  be  modified  accordingly.  For  the  pur- 
poses of  illustrating  the  principle  in  view,  I  shall  assume 
the  aggregate  of  American  Securities  placed  upon  foreign 
markets  during  the  eight  years  preceding  1874  as  not  less 
than  $1,200,000,000. 

The  exportation  of  securities  enables  us  to  retain  our  gold 
by  enabling  us  to  draw  bills  of  foreign  exchange  against 
them,  to  pay  for  our  imports ;  and  if  we  export  them  in 
great  quantities  we  shall  import  gold  in  payment  for  them. 
Gold  being  the  basis  of  the  currency  (with  specie  payments), 
by  being  retained  as  it  is  produced  in  our  mines,  or  by  be- 
ing imported,  it  increases  the  volume  of  the  currency  either 
by  entering  directly  into  circulation,  or  by  being  employed 
as  bank  reserves  on  which  is  issued  a  still  greater  increase 
of  the  volume  of  the  currency;  thus  increasing  and  inflating 
the  currency,  and  enhancing  prices,  reviving  and  quicken- 
ing business.  On  the  other  hand,  to  pay  their  annual  in- 
terest, or  the  principal  at  maturity,  or  their  repurchase  for 
investment,  is  depressing  to  business,  because  these  deplete 
the  country  of  its  gold,  contract  the  currency,  depress  prices 
and  obstruct  business;  and  should  they  be  returned  to  us  in 
great  volume,  the  paralysis  of  business  and  monetary  dis- 
tress resulting  would  be  very  great. 

With  an  irredeemable  currency  the  exporting  of  securities 
has  a  depressing  effect  upon  business.  They  become  a  sub- 
stitute for  gold  or  other  of  our  exportable  products  in  amount 
equal  to  their  gold  value  abroad.  They  are  exported  be- 
cause they  are  the  cheapest,  a-t  the  time,  of  all  our  exports. 
An  importer  having  imported  a  quantity  of  goods  and  sold 
them  in  our  markets,  has  received  our  irredeemable  cur- 
rency in  payment  for  them.  He  must  convert  his  currency 
into  some  of  our  exports  in  order  to  make  bis  payment 
where  he  obtained  his  imports.  If  our  securities  have  ad- 
vanced in  foreign  markets,  or  declined  in  our  market  relative 


OF  SPECIE  PAYMENTS 


to  other  exports,  they  are  sent  abroad  for  sale.  This  in- 
creases the  volume  of  foreign  exchange  in  our  market,  de- 
pressing the  price  of  bills  of  foreign  exchange  relatively  to 
the  prices  of  exports.  The  importer,  therefore,  finds  it  to 
his  advantage  to  buy  bills  of  foreign  exchange  drawn  against " 
securities  sold  abroad,  or  to  buy  securities  in  our  market 
direct  and  ship  them  abroad,  rather  than  buy  our  gold,  cot- 
ton, tobacco,  wheat,  or  any  other  of  our  exports.  Thus,  so 
long  as  our  securities  find  a  profitable  market  abroad,  their 
exportation  depresses  the  price  of  gold  and  the  price  of  all 
other  exportable  products. 

The  effect  of  augmenting  our  foreign  indebtedness  by 
selling  our  securities  in  foreign  markets  is,  firsts  to  depress 
the  price  of  gold  in  common  with,  and  in  like  manner  and 
degree  that  it  depresses  the  prices  of  all  other  exportable 
products.  Its  second  effect  is  to  stimulate  importation,  and 
thereby  to  depress  the  prices  of  all  our  domestic  products, 
which  come  into  competition  with  imported  articles. 

To  reduce  the  premium  on  gold  while  our  currency  prices 
remain  the  same,  is  the  same  in  effect  as  reducing  the  tariff. 

To  illustrate  this,  let  us  suppose  that  an  importer  sells  in 
our  market  a  yard  of  cloth  for  $5.00,  currency  prices,  when 
gold  is  selling  at  1.25  per  cent.  Suppose  the  tariff  upon 
that  class  of  cloth  is  one  dollar  a  yard  in  gold.  It  is  but 
reasonable  to  suppose  that  the  importer  makes  a  fair  profit 
upon  his  trade ;  and  we  will  also  suppose  that  domestic 
producers  in  competition  with  the  importer,  also  sell  a  like 
article  at  15.00  per  yard,  at  a  like  reasonable  profit.  It  is 
evident  that  the  importer  must  pay  $1.25  of  currency  to 
obtain  his  gold  dollar  to  pay  the  tariff.  This  leaves  him 
$3.75  currency,  for  which  he  can  obtain  $3.00  in  gold,  to 
pay  costs  of  production,  transportation  and  profit. 

Now  suppose  gold  to  decline  to  $1.10  per  cent.  The 
importer  sells  a  like  yard  of  cloth  for  $5.00;  and  the  dom- 
estic producer  also  sells  a  like  yard  of  cloth  for  $5.00.  It 
is  evident  that  the  importer  can  obtain  a  gold  dollar  to  pay 
the  tariff  for  $1.10  currency,  leaving  him  $3.90  currency  to 
be  converted  into  gold,  which  gives  him  $3.54,  to  pay  cost: 
of  production,  transportation  and  profit. 

This  is  an  increase  of  18  per  cent,  over  his  former  golii 
3 


34  ESSAY   ON  RESUMPTION 

proceeds.  If  we  suppose  his  profit  under  the  higher  gold 
rats  was  10  per  cent.,  and  that  he  can  repeat  his  importa- 
tions, or  return  the  same  capital  twice  a  year,  his  profits 
would  be  20  per  cent,  per  annum.  His  profits  having  been 
increased  18  per  cent,  by  the  fall  of  gold,  each  return  of 
his  capital  now  yields  him  28  per  cent,  or  56  per  cent,  per 
annum.  It  is  fair  to  presume  that  the  domestic  producer 
obtained  an  annual  profit  of  20  per  cent.,  equally  with  the 
importer,  under  the  higher  gold  rate,  prices  being  supposed 
to  have  adjusted  themselves  to  that  rate.  So  long  as  the 
price  of  the  cloth  produced  and  the  costs  of  production  re- 
mained the  same,  the  producer's  profits  remained  20  per 
cent,  per  annum,  while  the  importer's  profits  had  been  in- 
creased to  56  per  cent,  per  annum.  Is  it  not  evident  that 
importation  would  be  stimulated  until  the  price  of  cloth 
became  depressed? 

During  the  depression,  while  the  entire  margin  of  profits 
of  the  domestic  producer  would  be  dwindling  to  zero,  the 
profits  of  the  importer  would  be  constantly  greater  than 
during  the  higher  gold  premium.  Is  it  a  matter  of  astonish- 
ment, therefore,  that  New  York  and  Boston  importers,  and 
the  papers  in  their  interest,  and  the  bankers  and  capitalists 
immediately  connected  and  interested  with  them  should  be 
demonstrative  to  promote  legislation  to  reduce  the  gold 
premium  to  zero,  and  to  provide  for  an  early  return  to 
specie  payments? 

It  is  seldom  that  there  is  a  sudden  and  considerable  rise 
or  fall  of  gold,  without  its  being  succeeded  by  a  modifying 
re-action.  The  ''Gold  Bing,"  or  "Gamblers  in  gold,"  so 
called,  cannot  produce  a  rise  or  fall  of  gold  that  will  not  be 
soon  followed  by  re-action  through  the  laws  of  trade,  and 
transient  undulations  have  but  little  general  eflect  upon  the 
business  of  the  country.  The  average  tendency  through 
long  periods  determines  the  general  effects. 

However  gradual  the  decline  of  the  gold  premium,  though 
its  burdens  may  be  mitigated  by  some  reductions  in  the 
costs  of  production,  by  greater  opportunity  to  effect  this 
through  longer  periods  of  time,  they  are  burdens  still  upon 
domestic  producing  industry,  and  at  length  become  paralytic 
to  production  and  business — as  in  the  late  panic  which  was 


OF   SPECIE   PAYMENTS/  35 

most  oppressive  at  the  period  when  the  gold  premium  was 
the  lowest,  and  became  less  oppressive  as  the  gold  rate  rose 
from  1.08.  to  1.14 — yet  the  leading  New  York  papers  that 
plume  themselves  upon  their  superior  financial  knowledge, 
repeatedly  congratulated  the  country  upon  the  low  gold 
premium  and  the  '*  approach"  to  specie  payments — the  low 
rates  of  foreign  exchange,  and  the  return  of  gold  to  this 
country  ! — which  latter  was  like  carrying  coals  to  Newcastle, 
or  importing  breadstuffs  from  Liverpool  to  New  York,  in 
the  early  part  of  1837,  at  a  cost  of  $10.00  per  bbl.,  only  to 
be  re-shipped  to  Europe  during  the  succeeding  summer,  on 
a  sale  at  $5.00  per  bbl. 

But  though  the  loss  to  the  producer,  by  a  decline  of  the 
prices  of  products,  may  be  mitigated,  it  is  never  compen- 
sated, because  many  of  the  elements  of  cost  are  of  a  fixed 
character,  as  interest  on  capital  invested,  taxes,  insurance, 
etc.,  while  others  are  fixed  for  long  periods  of  time,  as 
leases,  contracts,  salaries,  commissions,  transportation,  etc., 
etc.  It  is  a  very  common  and  a  very  grave  error,  to  suppose 
that  contraction  and  expansion  of  the  currency,  affect  all 
prices  and  costs  in  like  manner,  degree  and  simultaneously. 
Some  are  affected  primarily,  immediately  and  intensely; 
others,  secondarily,  tertiarily,  or  more  remotely,  and  in  a 
degree  modified  by  their  proximity  or  remoteness  in  the 
chain  of  cause  and  effect  to  or  from  the  principal  operative 
cause. 

If  the  decline  of  the  gold  rate — fifteen  per  cent. — be  grad- 
ual, and  distributed  over  a  period  of  two  or  three  years,  it 
may  be  borne  with  a  fair  degree  of  prosperity.  Though  the 
anticipated  profits  fail  to  be  realized,  something  will  be 
gained;  and  business  will  continue  to  move  in  its  accus- 
tomed channels,  though  not  with  its  accustomed  alertness 
and  buoyancy;  but  if  a  similar  permanent  decline  occur  in 
a  single  year,  its  depressing  effects  could  not  fail  to  be  ser- 
ious and  embarrassing. 

Our  securities  sold  abroad,  have  depressed  the  price  of 
gold  and  the  prices  of  all  exportable  products,  and  directly 
stimulated  and  largely  augmented  importations,  and  repressed 
and  diminished  exportations.     Therefore,  the  augmentation 


36  ESSAY  ON  RESUMPTION 

of  foreign  indebtedness  has  caused  the  great  excess  of  imports 
over  exports. 

The  mal-policy,  therefore,  of  unnecessarily  issuing  bonds 
to  be  floated  to  foreign  mai-kets,  is  not  unlike  grappling 
Productive  Industry  by  the  throat,  to  afford  an  opportunity 
to  foreigners  to  rifle  his  pockets. 

Let  us  now  consider  the  effects  of  the  augmentation  of 
foreign  indebtedness  upon  the  distribution  of  the  currency. 
It  is  claimed  and  conceded,  that  the  west  and  south  have 
too  little  money  in  proportion  to  their  business  wants  rela« 
tive  to  the  north  and  east,  and  a  remedy  is  sought  in  the 
establishment  of  more  banks  in  those  sections.  They  are 
entitled  to  their  proportion  if  they  want  them,  I  refrain, 
however,  from  discussing  this  remedy;  I  cite  it  as  showing 
the  scarcity  of  money  in  those  sections.  Senator  Schurz 
has  said  that  the  remedy  is  fallacious,  and  that  what  is 
really  needed  in  the  south  and  west  is  more  capital.  This, 
if  true,  is  too  vague  to  be  understood — capital  is  not  neces- 
sarily money;  and  what  is  asked  for  is  more  money.  I 
suppose  he  would  call  the  cotton  crop  capital.  But  an  in- 
crease of  the  crop  twenty-five  per  cent,  might  have  impover- 
ished instead  of  enriching  the  south.  It  would  involve 
greater  cost  of  production,  preparation  and  transportation; 
while  its  increased  volume  might  depress  its  price  in  a  pro- 
portionate ratio,  yielding  less  net  proceeds  than  the  late 
crop. 

If  we  suppose  that  the  sale  abroad  of  our  securities,  has 
had  the  effect  to  keep  the  average  premium  on  gold  twenty 
per  cent  below  what  it  would  have  been,  had  there  been  no 
increase  of  our  foreign  indebtedness,  we  may  form  an  esti- 
mate of  the  effect  this  fact  would  have  upon  the  distribution 
of  currency.  Taking  the  present  gold  rate  at  $1.15,  we 
estimate  (for  illustration)  the  value  of  the  principal  staples 
exported  from  the  Southern  States  proper,  including  that 
which  is  consumed  within  our  country  outside  of  the  South- 
ern States,  and  including  costs  of  transportation  and  freight 
to  a  foreign  market  of  that  which  is  shipped  abroad,  as  not 
less  than  $400,000,000,  at  the  foreign  gold  valuation.  This, 
converted  into  currency,  would  be  $460,000,000.  This  is 
the  amount  of  currency  those  States  would  be  entitled  to 


OF  SPECIE  PAYMENTS.  37 

draw  within  their  borders  during  the  season.  (Their  wants 
and  supplies  would  probably  return  it  all— I  am  not  consid- 
ering that  point — and,  in  fact,  the  currency  itself  might 
never  pass  either  way — bills  of  inland  exchange  taking  its 
place  to  a  great  extent.)  If  the  gold  rate  were  twenty  per 
cent,  higher — 1.35 — the  gold  value  of  her  exports  would  be 
convertible  into  $540,000,000  of  currency,  enabling  the 
Southern  States  to  draw  to  themselves  $80,000,000  more 
>currency  by  her  annual  exports  than  they  are  enabled  to 
draw  under  the  low  gold  rate  of  1.15,  thus  increasing  her 
receipts  from  her  surplus  products  more  than  seventeen  per 
cent. 

This  increased  volume  of  receipts  would  be  the  increased 
value  of  the  exports  of  the  South,  and  would  give  rise  to  an 
increased  value  of  imports  to  supply  her  wants.  It  would 
not  be  a  clear  gain  to  her  to  this  amount,  as  many  of  her 
supplies  would  be  enhanced  in  cost  to  her  by  the  same 
cause — the  higher  premium  on  gold  ;  but  she  would  gain 
more  than  she  would  lose — the  magnitude  of  her  commerce 
with  her  sister  States  would  be  increased.  She  would  have 
more  money  to  do  business  with,  and  prices  and  values  of 
all  kinds  would  be  favorably  affected,  and  all  business  with- 
in her  borders  would  be  very  much  revived  thereby. 

If  the  Western  and  South-western  States  send  eastward 
for  export  and  for  consumption  in  the  Atlantic  States  an 
amount  double  that  estimated  as  sent  from  the  South,  we 
have  a  gold  value  of  $800,000,000.  This  at  the  present  rate 
of  gold  is  convertible  into  $920,000,000  currency.  Were 
the  gold  rate  1.35  instead  of  1.15 — as  it  is  assumed  it  would 
be,  were  it  not  for  the  export  of  securities — the  western  ex- 
ports of  $800,000,000,  gold  value,  would  be  convertible  into 
$1,080,000,000 — a  difference  in  her  favor  from  the  same  sur- 
plus products  of  $160,000,000  currency — over  17  per  cent, 
added  to  the  value  of  her  exports.  Thus  would  the  West- 
ern States  be  enabled  to  draw  to  themselves,  through  their 
annual  exports  on  the  present  basis  of  production  and  con- 
sumption, $160,000,000  more  currency,  or  currency  values 
in  bills  of  inland  exchange,  than  they  can  control  under  the 
present  low  gold  rate.  This  would  give  great  relief  to  their 
depressed  industry  and  business. 


38  ESSAY   ON   RESUMPTION 

If  it  be  thought  the  above  estimates  are  too  high,  either 
of  the  depression  of  the  gold  rate  from  the  cause  named,  or 
the  aggregate  shipments  from  the  South  and  West,  a  very 
large  reduction  may  be  made  from  the  aggregate  result — a 
reduction  of  three-eighths — and  still  leave  an  increase  of 
currency  to  the  South  of  $50,000,000,  and  to  the  West  of 
$100,000,000 — an  increase  of  nearly  eleven  per  cent,  over 
their  present  receipts  from  their  surplus  products. 

If  the  cause  of  this  difference  in  the  gold  rate — the  in- 
crease of  our  foreign  indebtedness — has  become  inopera- 
tive, from  the  exhaustion  of  foreign  credit,  or  from  the  ex- 
haustion of  our  securities  available  to  send  abroad — or  if, 
from  any  cause,  our  foreign  indebtedness  shall  not  increase 
at  a  rate  greater  than  the  sum  of  the  interest  of  that  in- 
debtedness—  then  we  have  arrived  at  conditions  under 
which  our  imports  cannot  exceed  our  exports.  Also,  it  is 
quite  probable,  if  our  present  legal  tender  irredeemable 
currency  shall  be  maintained,  that  in  the  ten  years  succeed- 
ing the  1st  of  January,  1874,  our  exports  (including  the  pre- 
cious metals)  will  exceed  our  imports  in  currency  values  at 
least  one  billion  dollars.  The  conditions  and  results  of  our 
foreign  commerce  will  be  very  different  and  very  much  sub- 
ject to  oscillations  if  steps  be  taken  and  persisted  in  to  re~ 
turn  to  a  system  of  specie  payments. 

Were  the  volume  of  the  currency  to  be  enlarged  definitely 
in  the  ratio  of  the  increase  of  population,  the  South  and 
West  would  enjoy  the  full  measure  of  the  benefit  of  the 
changed  conditions  of  commerce.  The  gold  rate  would  rise 
and  the  increased  currency  values  would  be  at  least  10  per 
cent,  for  the  same  quantities  of  products  exported  from 
those  sections. 

How  would^this^affect  the  Eastern  and  Northern  States. 
They  are  enabled  to  be  consumers  of  Southern  and  West- 
ern products  in  a  great  measure,  because  the  So.uth  and 
West  consume  their  products.  The  market  for  their  pro- 
ducts in  the  South  and  West,  will  be  enlarged  in  the  ratio 
of  the  increased  prosperity  of  those  sections.  Even  if  the 
quantities  of  goods  transported  either  way,  between  the 
sections  named  were  no  greater,  their  values  would  be  in- 
creased 10  per  cent.,  because,  as  has  been  shown,  the  South 


OF  SPECIE  PAYMENTS.  39 

and  West  would  have  10  per  cent,  more  money  to  spend 
annually,  and  it  would  return  in  tlie  same  time  to  the  East 
and  North  for  supplies.  Add  to  this,  that  a  prosperous 
people  always  produce  more  and  consume  more,  and  we 
may  reasonably  infer  that  the  internal  commerce  would  be 
increased  in  magnitude  in  the  increased  quantity  of  pro- 
ducts exchanged  as  well  as  in  increased  nominal  values. 

The  products  of  the  North  and  East  would  be  enhanced 
in  value,  equally  with  those  of  the  South  and  West,  though 
not  simultaneously.  The  South  and  West  producing  more 
largely  of  exportable  products,  whose  price  is  greatly  de- 
pendent upon  the  foreign  market  price,  the  demand  for  which 
would  be  directly  increased,  by  an  increase  of  the  gold  rate, 
their  prices  would  be  most  immediately  affected;  while  the 
prices  of  Eastern  and  Northern  products,  mainly  depending 
upon  domestic  markets,  and  affected  'by  the  competition  of 
foreign  importations,  would  be  affected  indirectly  by  the 
rise  of  the  gold  rate,  which  would  repress  importations  like 
an  additional  tariff,  until  the  market  prices  of  those  prod- 
ucts should  rise  proportioncitly  to  the  increase  of  the  gold 
rate;  also  would  they  be  affected  by  the  increased  demand 
from  the  South  and  West,  at  least  an  increase  of  a  hundred 
and  fifty  millions  annually.  Thus  would  the  prosperity  of 
one  section  react  upon,  and  inspire  that  of  the  other. 

In  supposing  the  gold  rate  to  rise  above  its  present  range, 
I  have  coupled  it  with  the  condition  that  the  volume  of 
currency  be  increased  correspondingly  with  the  increase  of 
population.  This  would  be. the  best  policy  to  pursue,  but 
it  is  probable  we  shall  have  no  increase  of  the  currency. 
What,  then,  will  be  the  probable  effect  with  a  fixed  quanti- 
ty of  currency,  limited,  for  all  purposes  to  $756,000,000. 
This  contemplates  the  withdrawal  of  the  $26,000,000— of 
the  reserve  already  issued,  contracting  the  present  volume 
in  circulation  to  that  amount  directly;  and  by  the  growth  of 
population  is  an  indirect  contraction,  and  both  tend  to  re- 
duce the  gold  premium. 

The  cessation  of  the  increase  of  foreign  indebtedness  will 
have  a  contrary  effect.  This  cause  may  be  sufficiently 
powerful  to  more  than  counteract  the  effect  of  contraction. 
We  may  see  therefore  an  apparent  paradox  of  a  rising  gold 


40  ESSAY  ON  BESUMPTION 

premium,  in  the  face  of  an  actual  contraction  and  an  in- 
verse contraction  by  the  growth  of  population.  But  if  the 
gold  rate  do  not  rise,  and  hold  a  higher  range  with  some 
degree  of  steadiness,  the  cause^  cited  will  prevent  its  rapid 
decline,  and  it  probably  stands  higher  now  than  it  would 
have  done  at  this  time,  if  we  had  not  met  a  check  in  plac- 
ing our  railroad  and  other  securities  upon  a  foreign  market. 
If  gold  should  rise,  the  effect  upon  the  money  distribution 
would  be  as  stated;  first,  enabling  the  South  and  West  to 
draw  to  themselves  a  larger  proportion  of  the  whole  volume 
in  circulation.  The  North  and  East  would  have  less  than 
they  have  had.  The  South  and  West  affording  a  better 
market  for  many  of  the  products  of  the  North  and  East, 
would  enable  those  industries  producing  those  products, 
and  industries  most  nearly  related  thereto,  to  draw  to  them- 
selves such  a  portion  of  the  common  currency,  as  is  neces- 
sary to  their  prosecution  to  the  extent  of  supplying  the 
demand.  Upon  this  hypothesis  it  is  evident  that  the  South 
and  West,  and  the  active  producing  industries  of  the  North 
and  East,  vnll  draw  to  themselves  a  larger  proportion  of  the 
common  fund  of  the  national  currency.  This  involves  the 
corollary  that  some  localities  or  pursuits,  will  draw  to  them- 
selves a  less  porportion  of  the  common  stock  of  currency, 
than  they  have  been  able  to  during  the  period  of  the  ex- 
portation of  our  securities.  This  effect  will  not  be  felt  by 
localities  pr  sections,  as  it  will  be  by  pursuits. 

It  has  been  charged  against  our  irredeemable  currency, 
as  inhering  to  it,  and  inseparable  from  it;  that  it  flooded  our 
markets  with  excessive  importations;  that  it  encouraged 
reckless  speculation  in  stocks ;  and  that  it  gave  fictitious  val- 
ues, and  led  to  over  speculation  generally,  and  especially  in 
real  estate.  Our  excessive  importations  cannot  be  contin- 
ued; they  will  probably  fall  short  in  the  five  years  from  the 
first  of  January,  1874,  more  than  1500,000,000  of  what  they 
were  in  the  five  years  preceding.  The  money  required  to 
move  these  imports  in  our  markets  will  be  released  from 
this  service,  and  will  flow  into  the  south  and  west,  whither 
it  will  be  drawn  as  has  been  set*forth,  and  to  the  producing 
industries  of  the  north  and  east. 

The  productive  industries  and  pursuits  having  become 


OF   SPECIE   PAYMENTS.  4l 

more  powerful  to  draw  a  larger  proportion  of  the  whole  vol- 
ume of  currency  into  their  service,  either  by  enhanced  prices 
of  products,  or  by  holding  the  same  prices  in  the  face  of 
an  expanding  population  with  a  fixed  volume  of  currency, 
other  pursuits  adversely  affected,  or  affected  favorably  in  a 
less  degree,  must  relinquish  a  portion  of  the  currency  they 
have  heretofore  drawn  to  their  service  and  control.  For 
this  reason  it  may  reasonably  be  anticipated  that  a  much 
less  proportion  can  flow  into  the  service  of  stock  specula- 
tion. The  tendency  has  been  for  money  to  flow  into  that 
service  because  the  productive  industries,  having  been  de- 
pressed, were  less  inviting  or  perha]-)s  repellant  to  enter- 
prise and  investment;  which  were  turned  to  more  inviting 
pursuits,  the  principle  of  which  was  speculation  in  stocks 
and, real  estate.  But  these  pursuits  will  not  be  seriously  or 
improperly  affected;  they  will  be  relieved,  however,  of  the 
temptations  of  vast  quantities  of  unemployed  capital  seeking 
investment.  With  a  growing  population  profitably  employ- 
ed in  all  its  industrial  activities,  real  estate  is  guaranteed 
sustained,  or  ascending  prices,  and  the  increased  and  in- 
creasing internal  commerce  of  the  country  cannot  fail  to 
yield  fair  returns  to  all  legitimate  and  properly  conducted 
transportation  investments;  and  their  quoted  prices  will  de- 
pend more  upon  such  returns,  and  less  upon  AVall  street 
manipulation,  while  fancy  stocks  will  find  less  reservoirs  of 
money  to  float  upon. 

Many  of  the  phenomena  of  business,  prices  and  com- 
merce presented  as  *  *  the  inseparable  evils  of  a  paper  cur- 
rency" are  caused  by  the  exportation  of  our  securities.  To 
illustrate  this,  and  for  further  comment,  I  introduce  the  fol- 
lowing extract  from  a  late  speech  of  Senator  Jones  of  Ne- 
vada, in  the  U.  S.  Senate : 

"If  money  is  scarce,  I  ask  in  the  name  of  common  sense,*  why  will  not 
people  give  more  for  it  ?  Why  do  not  the  values  of  property  in  this  country 
bear  some  just  relation  to  the  values  of  property  all  over  the  world?  Why, 
sir,  the  premium  on  gold  does  not  fully  show  the  depreciation  of  this  paper  ; 
and  there  is  the  difficulty.  I  differed  from  nearly  every  Senator  on  this  floor 
in  the  reasons  which  induced  me  to  support  the  amendment  introduced  by 
the  Senator  from  New  Jersey ;  [Mr.  Frelinghuysen.  ]  Objection  was  made  by 
friends  of  that  amendment  that  it  would  have  a  tendency  to  make  gold  rise 
in  price.  Now,  sir,  I  say  gold  ought  to  rise.  Every  other  commodity  in  this 
country — butchers'  meat,  groceries,  provisions  and  everything  that  enters 


42  ESSAY   ON  RESUMPTION 

into  domestic  use  has  risen,  so  that  in  relation  to  them  greenbacks  are  really 
at  a  depreciation  of  fully  forty  per  cent,  while  in  relation  to  gold,  which  has 
been  shorn  of  its  chief  uses  by  being  demonetized,  the  same  gi-eenbacks  are 
at  a  depreciation  of  only  ten  or  twelve  per  cent.  The  effect  of  this  is  to  dis- 
courage mining  enterprises  and  depress  mining  interests,  If  the  Govern- 
ment ever  intends  to  resume  specie  payments  those  interests  should  be 
stimulated  and  encouraged  by  every  legitimate  means. 

"There  is  no  demand  for  gold  in  this  country  beyond  the  small  amount 
necessary  to  pay  the  duties  on  imports  and  the  interest  on  the  national  debt. 
When  I  come  here  from  Nevada  with  gold  and  silver — the  only  money  in  cir- 
culation there— and  find  that  it  is  too  low  in  price,  I  cannot  help  it.  In  order 
to  get  its  full  value  I  must  engage  in  foreign  trade,  become  a  gambler  in  the 
gold-room,  or  leave  this  couutiy  and  go  to  France,  England,  or  some  other 
country  where  gold  is  the  standard  and  circulates  at  its  full  value.  If  I  stay 
here  I  must  trade  it  for  paper  at  a  premium  of  from  ten  to  twelve  per  cent, 
which,  as  I  said  before,  is  much  less  than  the  difference  between  paper  and 
every  other  commodity.  I  have  no  remedy.  I  must  submit  to  the  loss.  It 
is  to  the  interest  of  this  country  that  the  real  depreciation  of  paper  should 
be  exactly  measured  by  the  premium  on  gold.  That  this  is  not  the  case  there 
are  examples  all  around  us  to  prove.  That  no  good  does  or  can  result  from 
this  state  of  things  can  be  easily  demonstrated.  For  example,  suppose  1,000 
wagons  can  be  made  in  this  country  at  $100  apiece;  as  gold  stands  now  the 
foreigner  who  would  like  to  purchase  them  and  thus  give  us  an  export  trade 
to  balance  off  some  of  our  imports  could  pay  for  them  with  $90,000.  But  he 
can  get  them  for  $85,000  in  a  country  where  gold  circulates  as  money  and 
this  country  loses  the  business.  Now  suppose  gold  should  go  up  to  1.25, 
where  it  really  belongs,  in  that  case  he  could  pay  for  the  same  wagons  with 
$80,000  in  gold,  and  still  not  disturb  the  relation  between  paper  and  any- 
thing else  in  the  country.  This  would  make  possible  an  export  trade  that  is 
not  possible  now,  owing  to  the  depreciation  of  gold.  In  other  words,  gold 
is  the  cheapest  thing  in  this  country,  and  the  commodities  sent  here  from 
every  portion  of  the  earth  seek  that  in  exchange  in  preference  to  anything 
else  we  produce.  We  can  export  nothing  so  readily  as  gold.  It  is  the 
cheapest  commodity  we  have,  and  it  is,  therefore,  in  the  greatest  demand 
for  exportation." 

The  principle  point  in  the  foregoing  is,  that  the  gold 
premium  is  too  low  to  measure  the  true  difference  between 
the  currency  prices  of  many  articles,  and  what  he  assumes 
as  the  true  gold  price,  judging  from  ante-war  prices.  The 
only  cause  he  assigns  for  this  difference  is,  that  gold  has 
been  demonetized,  and,  consequently,  not  wanted  for  the 
purposes  of  money. 

Before  gold  was  demonetized  there  was  no  premium.  A 
gold  premium  presupposes  the  demonetization  of  gold. 
How,  then,  can  the  simple  demonetization  depress  the  pre- 
mium ?  If  gold  shall  be  re-monetized  the  premium  will  dis- 
appear altogether.     How,  then,  can  a  high  premium  on  gold 


OP   SPECIE   PAYMENTS.  4»^ 

be  preserved  by  making  gold  the  monetary  base?  Perhaps 
Mr.  Jones  would  have  expressed  his  idea  better  if  he  had 
said  the  premium  on  gold  of  late  years  has  given  to  gold  a 
less  purchasing  power  in  our  markets  than  it  would  have 
had  if  gold  were  the  monetary  base.  Also,  we  infer  his 
meaning  to  be,  that  if  the  Government  had  hoarded  gold  to 
the  amount  of  $250,0(^0,000 — an  amount  proportionate  to 
the  whole  amount  of  currency,  equal  to  the  ante-war  bank 
reserves — that  this  quantity  would  be  withdrawn  thereby 
from  the  gold  supply  for  exportation,  and  by  diminishing 
the  supply  would  raise  the  gold  premium.  This  would  have 
been  the  effect.  But  it  would  only  have  counteracted  one 
fourth  of  the  adverse  effect  resulting  from  the  exportation 
during  the  same  period  of  $1,000,000,000  of  securities.  Had 
the  Government  hoarded  $250,000,000,  over  its  present 
hoards,  there  would  be  outstanding  an  equal  amount  of  six 
per  cent,  bonds  which  have  been  purchased  and  canceled. 
Such  hoarding,  therefore,  would  cost,  on  interest  account,. 
$15,000,000  annually. 

Previous  to  those  bonds  being  purchased  and  canceled,, 
they  were  afloat  and  seeking  a  market,  and  had  they  not 
been  purchased  by  the  Government  they  would  probably 
have  gone  abroad,  mid  heen  added  to  the  volume  of  our  ex- 
ported securities.  In  that  case  their  effect  upon  the  gold 
premium  would  have  exactly  balanced  and  canceled  the  ef- 
fect of  the  hoarding  of  the  gold,  and  the  Government  would 
have  lost  $15,000,000  annual  interest,  without  any  compen- 
sation therefor  to  the  people. 

The  less  purchasing  power  of  gold  of  late*  years  results 
primarily  and  mainly  from  the  great  increase  of  our  foreign 
indebtedness,  in  connection  with  another  and  secondary 
cause,  before  alluded  to — that  of  the  different  effects  upon 
different  classes  of  commodities  and  forms  of  wealth,  in 
time  and  degree,  as,  in  their  relations,  they  are  near  to,  or 
remote  from,  the  active  cause.  Gold  and  all  exportable 
products  are  first  affected;  products  (including  manufac- 
tures) in  competition  with  imports  are  subsequently  affected 
indirectly  and  to  a  less  degree  by  the  increased  facilities  for 
importation,  resulting  from  a  low  gold  premium;  while  those 
products  or  pursuits  and  forms  of  wealth  which  are  little^ 


44  ESSAY   ON   RESUMPTION 

affected  by  tlie  conditious  of  foreign  commerce  are  last  and 
least  affected,  as  buildings  and  building  material,  trans- 
portation investments,  real  estate — rents,  leases — contracts 
extending  over  long  periods  of  time — salaries  for  long  terms, 
national.  State,  and  municipal  expenses  involving  taxation, 
and  transportation  expenses,  etc.  These  have  an  innate 
power  of  resistance  to  declining  prices,  and  form  a  class  of 
nearly  fixed  prices,  and  involve  nearly  fixed  costs  to  all  of 
those  who  are  under  the  necessity  of  paying  for  their  use  or 
appropriation.  The  prices  of  the  first  class  have  great  flexi- 
bility ;  of  the  second  class,  less  flexibility.  This  flexibility 
of  prices  possessed  by  the  first  and  second  classes  has  caused 
those  classes  to  bear  a  double  burden  during  the  decline  of 
gold  since  the  close  of  the  war. 

Soon  after  the  close  of  the  war  several  issues  were  with- 
drawn which  had  served  as  currency  to  some  extent,  as  cer- 
tificates of  indebtedness,  five  per  cent,  legal  tender  notes, 
and  compound  interest  notes.  Apart  from  the  withdrawal 
of  these,  there  has  been  a  direct  contraction  of  the  cur- 
rency, first,  by  the  withdrawal  of  the  reserves,  $44,000,000; 
second,  by  wastage,  which  at  one  quarter  of  one  per  cent, 
per  annum  of  the  whole  volume  for  eight  years  would 
amount  to  $15,000,000  (and  this  is  probably  too  low  an  es- 
timate), aggregating  $59,000,000;  and  inversely  by  the 
growth  of  population  (after  spreading  the  currency  over 
the  Southern  States,  which,  though  important,  I  disregard,) 
in  the  last  eight  years,  from  about  $35,000,000  to  more  than 
$40,000,000— about  fifteen  per  cent.  The  burden  of  this 
contraction  ialls  mostly  or  wholly  upon  those  industries 
producing  products  of  the  most  flexible  prices,  because  the 
class  of  fixed  prices  tenaciously  draws  to  its  own  service  as 
Jarge  a  volume  of  the  common  currency  as  is  necessary  for 
its  purposes,  and  the  classes  of  flexible  prices  must  relin- 
quish that  amount  from  their  service. 

To  illustrate  :  Suppose  an  agriculturist,  as  a  direct  effect 
of  the  contractions  referred  to,  finds  that  his  annual  prod- 
nets,  the  same  in  quantity,  bring  him  two  and  a  half  per 
cent,  gross  less  than  the  year  previous.  He  finds  half  his 
receipts  are  absorbed  in  fixed  costs  of  production — such  as 
interest  on  capital  invested  or  mortgage  loans,  taxes,  insur- 


OF  SPECIE  PAYMENTS.  45 

ance,  average  casualties  and  accidents,  transportation^ 
leases  or  rents,  etc.  All  these  costs  remain  the  same  with-^ 
out  abatement,  and  draw  to  themselves  from  his  gross  pro- 
ceed money  sufficient  for  their  payment.  His  loss  by 
depreciation  of  prices  falls  wholly  upon  the  remaining  pur- 
poses of  his  proceeds — the  payment  of  his  own  and  his 
family's  labors  and  the  active  capital  necessary  for  the  next 
year's  operations,  being  a  diminution  of  five  per  cent,  for 
these  purposes.  This  continued  for  a  series  of  years  at 
length  becomes  burdensome  and  unbearable,  and  naturally 
gives  rise  to  complaints  against  the  government  that  im- 
poses taxes,  middlemen  that  impose  commissions,  capital- 
ists that  furnish  loans,  and  those  who  charge  the  expenses 
of  transportation.  It  is  evideAt  that  the  agriculturist,  from 
contraction,  through  the  greater  flexibility  of  the  proceeds 
of  his  products,  has  become  unable  to  draw  to  his  service 
so  large  a  proportion  of  the  common  currency  by  a  differ- 
ence of  two  and  a  half  per  cent,  of  his  gross  proceeds,  and 
this  repeated  year  after  year  impoverishes  him.  Money 
becomes  too  scarce  with  him ;  and  as  with  him  so  with 
whole  sections  of  our  country  engaged  in  the  same  or  kin- 
dred pursuits.  These  not  only  bear  their  OAvn  proper  aver- 
age proportion  of  the  burden  of  contraction,  but  have  to 
bear  the  greater  portion  of  that  which  should  fall  to  other 
pursuits  and  interests,  because  these  latter  possess  greater 
power  of  resistance  to  any  diminution  of  their  income. 
This  principle,  in  conjunction  with  the  increase  of  foreign 
indebtedness,  and  not  the  demonetization  of  gold,  causes 
the  relatively  low  prices  of  exportable  products,  including 
gold. 

I  agree  with  Mr.  Jones  that,  "It  is  the  interest  of  tliia 
country  that  the  real  depreciation  of  paper  should  be  ex- 
actly measured  by  the  premium  on  gold;"  and  "That  this 
is  not  the  case  there  are  examples  all  around  us  to  prove  ;'* 
and  ' '  That  no  good  does  or  can  result  from  this  state  of 
things."  And  that  many  of  our  manufactures  and  agricul- 
tural products,  which  at  their  present  currency  prices  can- 
not be  exported  at  a  profit,  if  the  gold  premium  were  raised 
sufficiently  to  measure  the  true  average  difference  between 
gold  and  paper  prices,  could  bear   still  higher  currency 

or  THB 

nWIVERSITY 


16  ESSAY   ON   RESUMPTION 

prices  and  yet  be  sold  in  foreign  markets  for  gold  at  their 
prices,  which,  when  converted  into  a  quantity  of  currency 
corresponding  with  our  increased  gold  premium  would  pay 
remunerative  profits  to  their  producers ;  and  this  would  re- 
move the  fallacious  objection  to  our  irredeemable  currency 
often  presented,  that  it  has  closed  foreign  markets  to  many 
of  our  manufactures  by  having  raised  the  currency  cost  of 
production  out  of  proportion  to  the  foreign  gold  price. 

To  give  the  gold  premium  this  property  of  exactly  or  ap- 
proximately measuring  the  average  difference  between  gold 
and  paper  prices,  and  to  remove  by  abolishing  (not  by  re- 
adjusting) burdens  which  are  now  unequally  borne,  there 
should  be  a  limited  enlargement  of  the  volume  of  the  cur- 
rency, and  thereafter  a  constai^t  enlargement  of  the  quantity 
of  the  currency  in  the  ratio  of  the  increase  of  the  popula- 
tion using  it,  and  a  cessation  of  the  enlargement  of  our 
foreign  indebtedness.  To  promote  the  latter  let  statesmen 
be  wary  how  they  multiply  bonds  to  be  exported  to  foreign 
markets.  If  bonds  must  be  issued,  it  is  policy  to  induce 
them  to  stay  at  home;  and  to  this  end  let  them  be  explicitly 
payable,  principal  and  interest,  in  currency,  and  then  the 
less  issued  the  better. 

The  public  mind  has  been  and  still  continues  to  be  in- 
fatuated with  the  idea  that  it  is  desirable  to  bring  the  cur- 
rent or  convertible  value  of  the  currency  dollar  and  gold 
dollar  to  par  with  each  other.  This  is  a  mischievous  and 
costly  infatuation,  tending  directly  to  malpolicy  and  ad- 
versely to  the  country's  prosperity.  The  two  kinds  of  dol- 
lars are  distinctly  different,  and  there  is  no  reason  whatever 
why  they  should  be  of  the  same  current  or  convertible  value. 

It  were  just  as  sensible  to  insist  that  two  kinds  of  grain 
should  always  be  of  the  same  convertible  value,  or  cotton 
and  wool,  or  any  other  two  commodities  that  may  accident- 
ally be  of  the  same  price  betimes. 

The  aggregate  of  prices  and  specific  prices  of  all  ex- 
changeable commodities  and  values  become  adjusted 
through  the  laws  of  trade,  to  the  aggregate  of  legal  tender 
currency  and  currency  convertible  into  legal  tender  at  par 
(bank  currency)  in  active  circulation,  in  the  same  manner 
that  prices  adjust  themselves  to  all  currencies,  at  all  periods 


OF   SPECIE   PAYMENTS.  47 

and  in  all  countries.  Thus  our  national  currency  becomes 
the  measure  of  values  or  prices,  and  has  itself  a  corres- 
ponding current,  convertible,  legal  tender  par  value :  in  the 
same  manner  as  have  all  legal  tender  currencies  and  cur- 
rencies convertible  into  legal  tender  at  par,  as  was  the  case 
with  gold  and  silver  and  bank  currency  before  the  war. 
(And  even  when  the  practical  currency  is  not  legal  tender, 
and  ceases  to  be  convertible  into  legal  tender,  the  quantity 
in  circulation,  deducting  the  discount  by  depreciation,  con- 
tinues to  measure  prices,  as  was  the  case  with  the  bank  cur- 
rency during  suspension  in  1837  and  1857.)  Gold,  like 
every  other  commodity,  seeks  and  finds  its  own  currency 
price,  through  the  laws  of  trade;  and  there  is  no  more  rea- 
son why  a  given  weight  of  gold — the  gold  dollar — should 
always  have  the  same  currency  price,  than  that  any  other 
article  of  commerce  should  always  have  the  same  currency 
price.  Nor  is  it  undesirable  that  gold  should  leave  our 
country.  It  is  a  product  of  our  mining  industry,  and  it  i§ 
as  advantageous  to  exchange  it  in  the  marts  of  commerce  for 
other  commodities,  as  to  exchange  any  other  product  of  our 
industries.  In  the  progress  of  financial  science  with  us,  it 
has  become  unnecessary  as  money;  we  do  not  need  it. 
Other  nations  less  progressed  do  need  it;  let  them  have  it. 
As  well  might  the  miner  miserly  hoard  it  and  refuse  to  part 
with  it  for  necessaries,  conveniences  and  luxuries,  as  for  us 
as  a  nation  to  refuse,  or  dread,  to  part  with  it  to  other 
nations  for  the  same  purposes. 

Senator  Jones  perceives  and  affirms  that  the  gold  pre- 
mium is  not  the  true  measure  of  the  difference  between  gold 
prices  and  currency  prices.  Eesumptionists  generally  en- 
dorse and  laud  this  speech.  Do  they  endorse  this  part  of 
it? 

Amasa  Walker,  in  the  Overland  Monthly  for  June,  1873, 
in  unison  with  Mr.  Jones,  recognizes  this  fact  during  the 
decline  of  gold,  while  both  are  silent  in  reference  to  it  dur- 
ing the  rise  of  the  gold  premium.  Sam.  R.  Reed,  in  The 
Atlantic  Monthly  for  May,  1873,  recognizes  this  fact  both 
in  the  rise  of  the  gold  premium  during  the  war  and  its  de- 
cline and  rise  at  different  periods  since  the  war;  that  dur- 
ing the  war,  depreciation  of  the  general  purchasing  power 


48  ESSAY   ON  RESUMPTION 

of  the  greenback  was  not  nearly  so  great  as  that  indicated 
by  the  gold  premium,  and  the  rapid  and  great  decline  of 
gold  immediately  subsequent  to  the  war,  was  no  measure 
of  the  appreciation  of  the  purchasing  power  of  the  green- 
back. Here  is  the  testimony  of  resumptionists  to  a  gen- 
eral and  demonstrable  fact,  which  is  ignored  by  a  great 
majority  of  resumptionists,  who  persistently  insist  that  the 
currency  fluctuates  in  value,  and  the  values  of  all  property 
and  commodities  also  fluctuate  in  the  exact  ratio,  and  with 
every  variation  of.  the  gold  premium.  So  infatuated  are  they 
with  the  idea  of  the  necessity  of  a  gold  standard  of  value, 
that  if  by  some  inconceivable  mischance,  gold  should  be 
stricken  from  existence,  or  transmuted  into  a  baser  metal,, 
they  would  be  at  an  utter  loss  to  determine  whether  worldly 
wealth  thereafter  would  possess  any  value  whatever.  And 
so  near  such  a  catastrophe  is  our  nation,  with  only  about  a 
hundred  millions  left,  and  that  going  away  at  the  rate  of 
over  two  millions  a  week,  while  our  product  is  not  more 
than  half  that  quantity,  that  the  N.  Y.  Tribune,  in  a 
paroxysm  of  alarm,  deenis  it  neccessary  from  its  high 
pedestal  to  issue  its  mandate  to  the  country,  to  ' '  Stop  that 
gold!'' 

While  the  authorities  referred  to  recognize  the  fact,  that 
the  gold  premium  does  not  indicate  the  purchasing  power 
of  currency,  they  all  three  attribute  the  difference  during 
the  declining  phase,  to  causes  immeasurably  out  of  propor- 
tion to  the  effect.  Mr.  Jones  atti;ibutes  it  to  the  demonetiz- 
ing of  gold,  while  the  two  latter  attribute  it  to  the  bearing 
of  the  gold  market  by  the  Secretary  of  the  Treasury.  How 
incomparably  inadequate  these  causes  appear  when  com- 
pared with  the  great  volume  of  our  securities  pressing  for  a 
market,  in  direct  competition  with  gold  and  other  exports. 

Mr.  Jones  says:  *' There  is  no  demand  for  gold  in  this 
country,  beyond  the  small  amount  necessary  to  pay  the 
duties  on  imports,  and  the  interest  on  the  national  debt." 
Also  in  the  same  paragraph  he  says :  '*  We  can  export  noth- 
ing so  readily  as  gold.  It  is  the  cheapest  commodity  we 
have,  and  it  is  therefore  in  the  greatest  demand  for  exporta- 
tion." The  logic  and  consistency  (if  there  be  any)  in  these 
sentences  are  not  sufficient  to  win  very  enthusiastic  admira- 


OF  SPECIE  PAYMENTS.  49 

tion.  If  the  demand  for  gold  be  the  greatest  of  that  of  all 
our  exports,  how  came  it  to  remain  constantly  the  cheapest, 
while  it  is  at  the  same  time  the  easiest  to  export?  Has  it 
not  yet  had  time  to  find  its  equipoise  with  other  exports  ? 
Is  it  cheaper  to  export  than  our  securities?  Then  how 
comes  it  that  such  vast  quantities  of  these  are  exported, 
while  any  gold  remains  to  be  had  at  a  cheaper  market  price? 
How  comes  it,  if  gold  is  the  cheapest  and  always  in  greatest 
demand,  that  our  exports  of  cotton  exceed  our  gold  ex- 
ports from  three  to  five  hundred  per  cent.  ? 

Mr.  Jones  speaks  of  the  demand  for  gold  to  pay  duties 
on  imports  and  the  interest  on  the  national  debt,  as  though 
these  were  two  distinct  demands  upon  the  market  gold  sup- 
ply. The  payment  of  the  interest  of  the  national  debt,  in- 
stead of  being  a  demand  for  gold,  furnishes  a  supply  of 
gold  to  the  market  in  the  same  manner  that  a  sale  of  gold 
does,  and  in  these  two  ways  the  government  returns  to  the 
market  the  same  quantity  that  it  withdraws  from  the 
market  by  its  duties  on  imports,  unless  it  hoard  gold,  when 
it  returns  a  less  quantity,  and  when  selling  its  hoards  of 
gold  it  supplies  a  greater  quantity  than  it  demands.  When 
a  quantity  of  gold  sufficient  to  fill  the  channels  of  this 
circuit  is  once  appropriated  to  this  purpose,  the  demand 
is  balanced  by  the  return  supply,  and  both  may  be  dis- 
regarded, except  so  far  as  the  amount  necessary  for  this 
purpose,  or  the  hoard  of  gold,  be  increased  or  diminished 
from  time  to  time.  Hence,  except  under  the  policy  of 
hoarding  gold,  the  only  substantial  demand  for  gold  is  for 
exportation,  in  common  with  all  other  exportable  products, 
to  pay  for  foreign  imports,  and  to  pay  our  foreign  obliga- 
tions, and  the  small  quantity  used  in  the  arts. 

He  further  says :  *'  Gold  is  the  articulation  of  commerce; 
it  is  the  most  potent  agency  of  civilization.  It  is  gold 
that  has  lifted  the  nations  from  barbarism."  Christianity, 
science,  learning,  liberty,  law,  patriotism,  constitutional 
government,  a  free  press,  common  education,  discovery 
and  invention,  one  and  all,  you  are  '*  remanded  to  back 
seats;"  gold  comes  to  the  front!  Behold  and  reverence  the 
sovereign  that  has  done  what  you  have  so  long  been  credited 
with  doing.  Well,  well!  What  next? 
4 


50  ESSAY  ON  RESUMPTION 

Mr.  Jones  further  says:  *'The  money,  which  consists  of 
paper  promises,  cannot  be  a  standard  of  value."  Supposing 
that  he  means  to  include  the  legal-tender  quality  and  the 
general  acquiescence  of  the  people  in  the  use  of  such  money, 
as  a  currency,  I  do  not  hesitate  to  meet  that  assertion  with 
one  equally  emphatic — that  it  is  absolutely  false,  or,  more 
mildly,  a  pure  fallacy.  The  experience  of  the  past  twelve 
years  proves  it  a  fallacy.  Almost  every  other  portion  of 
the  speech,  from  which  it  is  quoted,  proves  it  a  fallacy.  It 
is  against  all  past  experience  of  the  power  of  paper  currency 
to  measure  values.  In  1836  and  1856  the  bank  paper  in 
circulation  was  the  real  and  active  measure  of  value;  while 
the  gold  in  the  bank  vaults,  on  which  it  purported  to  be 
based,  and  which  it  purported  to  represent,  but  did  not, 
because  it  was  not  limited  to  the  same  quantity,  forming  no 
part  of  the  circulation,  had  no  influence  whatever  in  measur- 
ing values.  The  attempt  to  bring  the  paper  circulation  into 
correspondence  with  its  assumed  base  in  1837  and  1857,  by 
contracting  the  volume  of  paper,  contracted  its  measure  of 
values,  and  so  disturbed  the  relation  between  the  values  of 
commodities  under  the  new  contracted  measure  of  values, 
and  the  value  of  accounts  and  obligations  assumed  under 
the  expanded  measure  of  values,  that  a  paralysis  of  business 
and  general  bankruptcy  were  inevitable.  In  an  article  in 
the  North  American  Beview,  for  January,  1874,  containing 
some  truths  and  sound  reasoning,  with  many  fallacies, 
leading  to  erroneous  conclusions,  Henry  Y.  Poor  recognizes 
the  fact,  that  our  currency  measures  values  by  asking: 
**Why  cannot  the  government  now  retire  its  outstanding 
notes?"  and  answering:  ** Because  the  business  of  the 
country  has  adjusted  itself  to  their  present  amount."  And 
indeed,  all  that  is  said  about  the  rise  of  prices  as  the  result 
of  inflation,  is  an  acknowledgement  that  the  currency  meas- 
ures values,  and  is,  therefore,  the  standard  of  values. 

Again:  *'No  government,  no  people,  can  be  prosperous 
that  ignores  the  proposition  that  honesty  is  the  best  policy; 
that  by  any  sort  of  legislation  disturbs  the  relationship 
between  debtor  and  creditor."  This  is  very  sweeping,  cer- 
tainly. How  does  it  harmonize  with  bankrupt  laws,  statutes 
of  limitation,  and  homesteads  and  other  exemptions  from 


OF   SPECIE  PAYMENTS.  51 

•execution?  And  how  does  it  harmonize  v/ith  a  refusal  to 
legislate  to  prevent  a  steady  and  oppressive  contraction 
tvhich  disturbs  the  relation  of  debtor  and  creditor? 

Mr.  Jones,  speaking  of  California  and  Nevada,  says:  "We 
have  never  had  any  money  panics.  We  have  never  called 
upon  the  Congress  of  the  United  States  to  relieve  the 
gambler  from  any  portion  of  his  liabilities,  or  to  issue  more 
money,  in  order  that  he  might  more  easily  pay  his  debts." 
*    *    *    And  closes  his  speech  as  follows : 

"  Gentlemen  ask,  '  How  will  you  get  the  gold  with  which  to  resume  spe- 
cie payments? '  As  a  general  proposition,  I  would  say  that  the  Govern- 
ment should  hoard  gold;  that  it  should  take  no  part  in  the  gold  gambling  of 
this  country.  I  admit  it  would  be  a  great  injustice  to  the  debtor  to  say  that 
specie  payments  shall  be  resumed  immediately,  because  he  contracted  his 
debt  when  currency  was  worth  about  what  it  is  to-day,  and  it  would  not  be 
just  to  make  him  pay  in  an  appreciated  currency.  But  he  has  to  pay  some 
time.  I  would  put  it  off  three  years,  and  say  that  on  the  first  day  of  Jan- 
uary, or  the  first  day  of  July,  1877,  the  greenbacks,  the  national  legal  tender, 
should  be  redeemed,  either  in  bonds  or  in  gold,  at  the  option  of  the  govern- 
ment, and  destroyed,  and  at  the  same  time  I  would  repeal  the  legal  tender 
clause  as  to  all  debts  contracted  after  that  time.  This  would  be  contraction, 
and  would  cause  a  reduction  in  the  price  of  everything.  Without  such  con- 
traction the  maintenance  of  the  specie  standard  would  be  impossible.  The 
effect  of  that  would  be  to  make  the  condition  precedent  to  a  return  to  specie 
payments.  Unless  we  make  these  conditions  precedent,  unless  we  fix  that 
time  certain  in  the  future,  the  people  will  never  commence  to  prepare  for  it, 
and  will  never  be  more  ready  than  they  are  to-day." 

What  does  Mr.  Jones  call  a  money  panic?  The  failure  of 
the  leading  banking  houses  in  San  Francisco  in  1855,  and 
the  general  depression  of  business  and  depreciation  of  prop- 
erty in  other  parts  of  the  State,  as  well  as  in  San  Francisco, 
was  felt  with  as  much  severity  and  was  of  much  longer  con- 
tinuance than  the  late  panic  in  the  currency  States.  If 
that  was  not  a  money  panic  we  have  not  had.any.  A  great 
deal  is  in  a  name. 

The  Hon.  Senator  says  that  California  and  Nevada  have 
never  called  upon  Congress  **to  relieve  the  gambler  from 
any  portion  of  his  liabilities,  or  to  issue  more  money,  in 
order  that  he  might  the  more  easily  pay  his  debts."  This 
sentence  is  worthy  of  consideration  in  several  respects.  The 
word  *' gambler"  is  used  to  designate  those  in  whose  inter- 
est an  enlargement  of  the  volume  of  currency  is  assumed  to 


62  ESSAY  ON  RESUMPTION 

be  proposed.  The  whole  tenor  of  the  speech  from  which  I 
have  quoted,  shows  that  the  great  agricultural  industries, 
and  those  great  sections  of  our  country  devoted  to  them, 
constituting  more  than  half  the  territory  and  fully  half  the 
population  of  the  country,  have  been  seriously  depressed 
for  many  years,  and  if  they  seek  relief  from  their  unequal 
burdens,  are  they  to  be  characterized  by  opprobrious  epi- 
thets? These  have  nothing  to  do  with  the  law^s  of  trade, 
and  ought  to  have  but  little  place  in  statesmanship.  But 
the  leading  idea  is,  that  the  States  referred  to,  have  never 
called  upon  Congress  to  legislate  upon  the  finances  of  the 
country  with  a  view  to  their  especial  benefit.  They  aro 
modest  States,  and  would  not  ask  fdr  special  favors.  But 
then,  the  Hon.  Senator,  representing  one  of  those  States, 
before  he  resumes  his  seat,  recommends  that  the  govern- 
ment  should  hoard  gold  as  a  condition  precedent  to  resump 
tion.  This  would  withdraw  from  the  gold  supply  two,  three, 
or  four  hundred  millions  of  dollars,  and  thereby  raise  the  price 
of  gold.  In  view  of  the  fact  that  Nevada  is  largely  engaged  in 
mining  the  precious  metals,  the  ungenerous  may  suppose 
that  the  principal  object  in  view  is  to  benefit  the  mining  in- 
terest, but  this  can  be  only  incidental  to  the  great  national 
consideration  of  securing  a  sound  currency.  The  Senator 
will,  undoubtedly,  exercise  a  christian  charity  toward  his 
ungenerous  critics,  when  he  reflects  how  he  might  view  a 
proposition  from  the  South  to  hoard  cotton,  her  peculiar  pro- 
duct, to  the  value  of  two,  three,  or  four  hundred  millions  dol- 
lars— to  withdraw  it  from  the  market  supply — to  raise  the 
market  price,  and  thereafter  make  it  the  basis  of  a  circulat- 
ing medium  that  it  might  not  return  upon  the  market.  Or 
a  similar  proposition  from  the  West  to  hoard  wheat  or  corn; 
or  from  Pennsylvania  to  hoard  coal.  If  these  propositions 
appear  very  different  from  the  proposition  of  Mr.  Jones,  the 
difference  is  one  of  con-sociation  or  dis-sociation  of  ideas, 
more  than  of  principle  or  philosophy.  He  does  not  say  how 
much  gold  he  would  hoard,  but  much  or  little,  the  cost  of  this 
first  step  toward  resumption  would  be  at  least  the  annual 
interest  of  the  sum  hoarded. 

His  second  proposition  is  *'that  on  the  first  day  of  Jan- 
uary, or  the  first  day  of  July,  .1877,  the  greenbacks,  the  na- 


OP  SPECIE   PAYMENTS.  53 

iional  legal  tenders,  should  be  redeemed,  either  in  "bonds  or 
^old,  at  the  option  of  the  Government,  and  destroyed,  and 
at  the  same  time,  I  would  repeal  the  legal  tender  clause  as 
to  all  debts  contracted  after  that  time."  This  is  all  that  he 
has  offered  in  reference  to  his  method  of  resumption,  yet  he 
seems  to  imply  something  further  to  complete  resumption, 
as  he  says:  "The  effect  of  that  would  be  to  make  the  con- 
dition 'precedent  to  a  return  to  specie  payments."  And 
further:  *' Unless  we  make  the  conditions  precedent,  unless 
we  fix  the  time  certain  in  the  future,  the  people  will  never 
prepare  for  it,  and  will  never  be  more  ready  than  to-day." 

Now  let  us  examinq  how  this  would  work.  The  first 
point  in  the  proposition  is  to  bind  and  determine  the  action 
of  a  future  Congress.  This  is  pernicious  policy,  if  it  be 
anything  more  than  a  recommendation,  as  being  contrary 
to  the  genius  of  our  institutions,  in  presuming  to  dictate  to 
the  people  what  policy  they  may  require  to  be  pursued  by 
their  future  representatives.  In  its  financial  aspect,  how 
<}an  it  be  known  that  the  people  will  be  any  better  prepared 
for  resumption  then  than  now;  or  that  they  will  at  that  time 
wish  to  resume?  If  the  Government  hoard  gold  in  suffi- 
cient quantity,  it  may  be  better  prepared ;  but  the  people 
may  not.  Prices  may  remain  on  a  range  higher  than  gold, 
and  the  claim  will  be  set  up  that  to  change  from  a  currency 
to  a  gold  basis,  would  involve  a  great  reduction  of  prices. 
And  this  is  foreseen  and  acknowledged  by  Mr.  Jones,  when 
he  says  :  *'This  would  be  contraction,  and  would  cause  a 
reduction  in  the  price  of  everything." 

This  is  legislation  with  a  view  direct  to  change  prices. 
The  sophistry  usually  set  up  in  defense  of  such  legislation 
is,  that  all  commodities  and  values  being  equally  affected, 
there  is  no  harm  done.  And  it  is  because  this  is  a  sophis- 
try, and  not  a  truths  that  there  is  irretrievable  harm  done  by 
such  legislation.  It  has  been  shown  that  there  are  grea- 
industries  and  great  sections  of  country  peculiarly  susceptit 
ble  to  the  reducing  and  paralyzing  effects  of  a  contracting 
currency,  which  not  only  have  to  bear  their  own  proper 
share  of  the  aggregate  reduction  of  prices,  but  have  to  bear 
that  portion  which  properly  belongs  to  other  industries, 
pursuits,  interests,  and  forms  of  wealth,  which  are  so  in- 


54  ESSAY  ON  RESUMPTION 

trenched  behind  defenses  that  they  can  resist  and  ward  off" 
their  share  of  the  aggregate  reduction. 

The  corollary  of  this  is  also  true,  with  some  modification^ 
during  an  era  of  inflation — that  is,  when  the  currency  is  in- 
creased in  a  ratio  greater  than  that  of  the  increase  of  popu- 
lation—  that  those  industries,  pursuits,  callings,  interests, 
and  forms  of  wealth,  which  I  have  classified  as  of  fixed  or 
nearly  fixed  values,  and  which  have  the  power  to  resist  the 
effects  of  a  contracting  currency,  are  the  last  to  avail  them- 
selves of  the  effects  of  an  expanding  currency,  as  will  be 
seen  when  we  reflect  upon  the  nature  of  debts  and  credits — 
loans  on  mortgages — leases — rents — salaries  for  terms — con- 
tracts extending  over  considerable*  time,  insurance,  taxes, 
and  those  expenses  and  commodities  whose  prices  become 
conventional — and  such  things  as  these  enter  into  as  a  large 
element  of  cost. 

Those  industries  the  prices  of  whose  products  are  most 
flexible, -are  very  susceptible  to  the  earlier  waves  of  an  ex- 
panding currency.  But  when  they  have  been  carried  to  a. 
certain  height,  they  find  a  limit  by  the  laws  of  supply  and 
demand,  through  the  operations  of  commerce.  Rising  prices 
stimulate  production,  and  the  surplus  must  seek  a  foreign 
market ;  and  the  foreign  price  (if  the  surplus  be  a  consider- 
able portion  of  the  whole  product),  when  converted  into 
currency  through  the  gold  premium,  determines  the  price 
of  the  whole  product  in  the  domestic  market.  When  the 
productive  industries  have  drawn  to  their  service  as  much 
of  the  increasing  volume  of  the  currency  as  they  can  profit- 
ably employ,  and  their  prices  find  their  maximum  limita- 
tions, if  the  inflation  continues  as  during  the  war,  the  re- 
dundancy of  money  continually  finds  new  and  enlarging 
channels  in  which  to  flow — in  the  exchanging  of  increasing 
products^ in  the  increase  of  investments  in  the  productive 
industries,  and  in  the  more  hazardous  and  speculative  en- 
terprises, and  in  investments  in  internal  improvements — 
the  opening  of  mines — the  establishment  of  new  and  untried 
industries,  speculations  in  real  estate,  stocks,  etc. ;  and  these 
channels,  which  the  increasing  volume  of  currency  first 
makes,  and  then  flows  in,  absorb  the  flood  with  an  ever 
widening  capacity.     And  it  is  because  it  is  an  incident  of 


OF  SPECIE  PAYMENTS.  55 

inflation,  that  after  satisfying  the  wants  of  productive  indus- 
try, the  redundancy  flows  into  moi;(e  hazardous  investments, 
and  among  them  into  Wall  Street  stock  operations,  that 
these  operations  have  first  been  regarded  as  typical  and 
representative  of  its  general  effects;  and  secondly,  those  ef- 
fects, in  whatever  form  of  enterprise  they  appear,  and  how- 
ever they  have  enriched  and  beautified  the  country,  and 
however  much  they  have  added  to  the  prosperity  and  re- 
sources of  the  people,  and  illustrated  their  genius,  their 
energy  and  their  enterprise,  by  an  adroit  and  unwarrant- 
able use  of  language,  are  designedly  and  flippantly,  but  un- 
justly, characterized  by  all  the  opprobrious  epithets  applied 
to  Wall  Street  operations. 

Nothing  herein,  however,  is  designed  to  advocate  an  en- 
largement of  the  currency  out  of  proportion  to  the  growth 
of  population.  Such  an  increase  would  have  objectionable 
effects,  but  the  evil  effects  of  such  an  increase  would  be 
magnified  ten  fold — yea,  an  hundred  fold — by  a  contraction 
of  like  amount.  During  inflation,  though  there  is.  a  differ- 
ence in  the  relative  effects  upon  different  industries  and  in- 
terests, yet  all  feel  in  a  greater  x>r  less  degree  the  buoyancy, 
hopefulness,  and  inspiration  of  the  general  prosperity ;  and 
there  are  but  few,  very  few,  of  those  whose  interests  are 
chiefly  in  the  class  of  fixed  values,  who  are  not,  to  a  greater 
or  less  extent,  compensated  through  other  interests,  and 
who  do  not  profit  in  common  with  others  by  the  increased 
aggregate  of  actual  wealth  arising  from  the  increased  activ- 
ity of  all  productive  forces.  While,  during  contraction,  not 
only  is  there  a  different  relative  effect  upon  different  indus- 
tries and  interests,  but  all  feel  in  a  greater  or  less  degree 
its  depressing  and  harassing  effect,  and  the  aggregate  waste 
from  enforced  idleness  and  the  obstruction  to  business,  the 
stagnation  of  all  the  productive  forces,  and  the  sacrifices  of 
property,  and  the  losses,  harassments  and  costs  by  the  en- 
forced settlement  of  accounts,  cause  an  enormous  loss  of 
real  wealth,  which  is  sure  to  affect  seriously  and  detriment- 
ally even  the  most  favored  classes. 

And  here  I  reiterate  that  a  specie  base  currency  involves 
a  constant  ebb  and  flow  of  the  quantity  of  currency  in  cir- 
culation, while  an  irredeemable  currency  can  be  continued 
in  a  fixed  ratio  to  the  population. 


5(}  ESSAY   ON  RESUMPTION 

And,  further,  with  a  specie  base  currency  every  expansion 
involves  necessarily  a  contraction.  While  with  our  irredeem- 
able currency  expansion  does  not  involve  contraction,  and 
contraction  only  follows  expansion  when  unwise  legislation 
promotes  it  or  permits  it.  For  this  reason  our  irredeemable 
currency  in  the  late  panic  stood  like  a  bulwark,  to  stay  and 
return  the  falling  tide  of  prices.  The  panic  was  in  nowise 
attributable  to  the  nature  of  the  currency.  It  was  the  re- 
sult of  a  shock  to  the  public  mind  and  business  confidence 
by  the  failure  of  a  great  banking  house  which  had  assumed 
too  great  responsibilities  in  a  special  undertaking  which 
locked  up  its  capital :  which  shock  reacted  upon  and  shook 
the  superstructure  of  the  monetary  system — of  deposits  and 
loans,  and  bank  and  business  credit — but  the  basis— the 
currency — remained  firm  without  depreciation  in  value  or 
diminution  in  quantity,  and  this  incontractibility  of  the  cur- 
rency, either  by  depreciation  or  diminution,  together  with 
the  slight  increase  in  quantity  through  the  necessities  of 
the  Government,  is  what  so  soon  checked  the  panic  and  re- 
stored business  confidence,  and  saved  the  country  from  in- 
comparably greater  business  disaster  and  paralysis.  Mr. 
Jones  proposes  deliberately  to  legislate  to  bring  about  con- 
traction, his  end  in  view  being  to  substitute  a  redeemable 
for  an  irredeemable  currency,  which  is  the  substitution  of 
a  worse  for  a  better  currency ;  a  change  to  be  avoided  in- 
stead of  being  sought,  even  if  it  could  be  had  without  cost. 

*'0n  the  day  set  the  greenbacks  should  be  redeemed 
either  in  gold  or  in  bonds  at  the  option  of  the  Government, 
and  destroyed."  If  the  Government  on  and  after  the  day 
set  is  able  to  redeem  all  greenbacks  presented  in  gold,  the 
gold  board  and  gold  premium  would  be  at  an  end — currency 
would  be  at  par  with  gold,  because  greenbacks  would  be 
redeemable  in  gold  on  demand.  That  would  be  what  is 
called  ** resumption."  All  business  thenceforth  would  be 
on  a  gold  basis.  Placing  legal  tenders  upon  a  gold  basis 
or  canceling  them  would  place  all  business  upon  a  gold  ba- 
sis. The  national  banks  would  be  the  first  at  the  doors  of 
the  Treasury  demanding  gold  for  their  legal  tender  reserves, 
and  would  not  be  slow  in  eliminating  the  legal  tenders  from 
the  volume  of  money  passing  through  their  hands  and  pre- 


OF  SPECIE  PAYMENTS.  57 

sen  ting  them  for  redemption.  The  gold  they  would  obtain 
for  their  reserves  would  still  be  held  as  reserves ;  beyonS 
that  the  gold  received  would  be  a. part  of  their  active  loan- 
able capital,  and  after  the  exhaustion  of  their  bank  notes 
on  hand  would  pass  into  circulation  as  loans,  and  their  gold 
reserves  would  be  drawn  upon  to  redeem  their  notes  and 
must  be  replenished.  Thus  gold  would  go  into  circulation 
to  supply  the  place  of  greenbacks  withdrawn  from  active 
circulation.  The  gold  put  into  circulation  would  be  of  equal 
volume  to  the  legal  tenders  withdrawn  from  circulation  and 
destroyed.  It  may  be  asked,  therefore,  how  can  that  be 
contraction  and  how  can  that  disturb  prices?  Let  us  see. 
The  reduction  and  disturbance  of  prices  would  commence 
before,  and  continue  after  the  day  set  for  specie  redemp- 
tion. At  a  period  six  or  eight  months  anterior  to  that  day, 
let  us  suppose  the  premium  on  gold  to  be  15  per  cent.,  and 
that  prices  of  commodities  were  adjusted  to  this  rate.  Im- 
portations may  be  supposed  to  be  reasonably  profitable  at 
the  ruling  prices,  with  a  rebate  to  the  importer  of  15  per 
cent,  for  the  conversion  of  currency  into  gold.  With  the 
same  volume  of  currency,  prices  remain  unchanged,  except 
by  demand  and  supply.  The  demand  will  be  diminished 
by  the  attempt  to  prepare  for  resumption,  by  holders  in- 
termediate between  producers  and  consumers  endeavoring 
to  sail  under  bare  poles  with  light  stocks,  by  selling  all 
they  can  and  buying  as  little  as  they  can  in  anticipation  of 
lower  prices.  Thus,  each  acting  for  himself,  they  conspire 
to  a  common  end — the  lessening  of  the  demand  and  the 
lowering  of  prices.  On  the  other  hand,  the  supply  will  be 
increased  by  increased  importations.  Importers  anticipat- 
ing a  decline  of  the  gold  premium,  multiply  their  imports, 
to  make  as  large  sales  as  possible  before  the  decline  of 
prices.  As  the  time  approaches,  if  the  gold  premium  re- 
mains high,  currency  will  be  hoarded  and  withdrawn  from 
active  circulation  by  those  having  to  make  payments 
abroad.,  as  it  becomes  more  profitable  to  await  the  day  of 
redemption  and  conversion  into  gold  at  par,  than  to  lose 
the  ruling  high  premium  by  present  conversion.  This 
lessens  the  demand  for  gold  and  helps  to  depress  its  price, 
and  by  contracting  the  active  currency,  as  well  as  by  the 


58  ESSAY  ON  RESUMPTION 

effect  on  gold,  it  depresses  the  prices  of  other  commodities. 
The  volume  of  imports  increasing  day  by  day,  can  be  put 
upon  the  markets  at  steadily  declining  prices,  and  still  pre^ 
serve  the  ordinary  profits,  because  the  gold  premium  is  day 
by  day  declining  until  it  touches  zero  on  the  day  of  redemp- 
tion. Gold,  the  most  sensitive  or  flexible,  is  first  in  finding 
the  gold  base  price. 

The  prices  of  other  commodities  linger  behind  at  a  great- 
er or  less  remoteness,  resisting  the  downward  tendency 
with  all  the  power  of  resistance  they  have,  until  they  find  a 
point  in  relation  to  the  new  status  which  they  can  maintain. 

When  prices  have  adjusted  themselves  to  the  gold  base, 
it  will  be  found  that  all  those  products  which  depend  mainly 
or  largely  upon  foreign  markets,  have  suffered  a  decline  of 
nominal  value  equal  to  the  former  gold  premium.  While 
products  depending  upon  home  markets  in  competition 
with  imports  will  have  declined  less,  because  less  directly 
affected,  and  because  the  tariff  affords  them  a  measure  of 
defence. 

It  is  obvious  from  the  causes  stated  that  the  prices  of 
exportable  products  and  of  products  in  competition  with 
imports,  would  decline  in  consequence  of  the  decline  of  the 
gold  premium,  while  there  would  have  been  but  a  slight 
contraction  of  the  currency — that  of  hoarding  currency  in 
anticipation  of  redemption — and  the  question  may  arise, 
how  is  it  that  such  a  fall  of  prices  can  occur  without  a  cor- 
responding contraction  of  the  currency?  The  answer  is  to 
be  found  in  the  two  principles  before  explained.  1st,  that 
domestic  prices  will  be  determined  in  a  great  measure  by 
the  prices  of  surplus  products  seeking  foreign  markets.  2d, 
by  the  commercial  distribution  of  the  currency. 

The  proportion  of  the  common  currency  which  a  com- 
modity can  draw  to  its  service  is  in  ratio  to  the  quantity 
and  price  of  the  commodity.  Whatever  depresses  its 
price  forces  it  to  relinquish  a  portion  of  the  currency  it 
controled  under  the  higher  price,  and  that  portion  is  not 
merely  free  to  flow,  but  is  forced  into  other  channels  of  em- 
ployment, because  the  channels  it  has  been  flowing  in,  hav- 
ing been  compressed,  cannot  hold  it.  If  there  be  channels 
of  legitimate  enterprise  and  industry  open  and  ready  to  re- 


OF   SPECIE  PAYMENTS.  69 

ceive  it,  it  flows  into  them ;  but  if  not,  it  finds  the  channsel 
of  the  class  of  more  hazardous  investments,  (stock  specula- 
tions, real  estate  investments,  etc.,)  whose  capacity  to- 
absorb  is  as  elastic  as  the  nominal  values  floated  upon  them. 
Hence  the  volume  of  currency  released  from  the  service  of 
productive  industries  by  a  decline  of  prices,  flows  directly 
into  the  channels  of  speculative  investments,  and  is. 
absorbed  by  the  rising  tide  of  nominal  values  therein;  and 
this  portion  of  the  common  currency  will  continue  to  be 
diverted  to  this  service,  until  it  shall  be  forced  out  of  it  by 
a  further  contraction  of  the  circulating  medium,  which 
would  follow  the  redemption  of  greenbacks  in  gold. 

It  will  be  found,  therefore,  that  one  of  the  effects  of  a  re- 
turn to  a  gold-base  currency,  as  recommended  by  Senator 
Jones,  will  be,  for  a  time  at  least,  to  increase  the  ''mania" 
for  ''gambling"  in  stocks. 

In  grouping  the  classes  of  property  of  fixed  values,  debts 
and  credits  are  included,  and,  consequently,  the  relation  of 
debtor  and  creditor,  and  I  might,  therefore,  proceed  with- 
out further  consideration  of  this  relation,  but  its  importance 
merits  further  attention.  Whenever  the  Government  re- 
deems its  greenbacks  in  gold,  every  debt  and  obligation  in  the 
country  is  placed  upon  a  gold  basis.  The  magnitude  of  the 
amount  of  debts  and  liabilities  and  accruing  obligations 
cannot  be  told.  And  the  fixedness  of  value  of  this  vast 
amount  of  money  of  account  is  little  appreciated  in  the  dis- 
cussions of  the  financial  problem.  Most  persons  are  at  the 
same  time  both  debtors  and  creditors,  and  the  same  may  be 
said  of  the  respective  sections  of  the  country.  Each  is  a 
debtor  or  creditor  as  his  or  its  excess  is  debt  or  credit. 

The  excess  only  of  debt  or  credit  can  be  affected  by  a 
change  of  currency  values :  but  this  excess  amounts  to  bil- 
lions of  dollars,  and  affects  differently  sections  in  the  same 
manner  as  it  affects  differently  individuals.  And  the  burden 
of  all  indebtedness  is  greatly  magnified  by  contraction  and 
change  of  basis  of  price,  and  the  purchasing  power  of  the 
creditor's  demand,  is  enhanced  in  the  same  ratio.  How 
does  this  harmonize  with  the  Hon.  Senator's  moral  and  po- 
litical ethics  as  announced  and  heretofore  quoted,  viz:  "No 
government,  no  people,  can  be  prosperous  that  ignores  tha 


^0  ESSAY  ON  RESUMPTION 

proposition  that  honesty  is  the  best  policy,  that,  by  any 
sort  of  legislation,  disturbs  the  relationship  between  debtor 
^nd  creditor?" 

During  expansion,  the  creditor,  who  is  relatively  injured, 
may  not  be,  and  seldom  is,  positively  injured  thereby.  As 
has  been  shown,  he  is  often  compensated  in  many  ways,  and 
is  benefited  by  the  general  increased  activity  and  pros- 
perity. 

During  contraction,  on  the  other  hand,  though  he  may  be 
benefited  relative  to  the  debtor,  he  may  be,  and  almost  in- 
variably is  positively  injured,  by  sharing,  to  a  greater  or 
less  extent,  the  common  loss  resulting  from  stagnation  of 
business  and  bankruptcy.  The  burden  of  debt  may  crush 
the  debtor,  but  the  creditor  cannot  shield  himself  from  all 
harm.  The  positive  evil  to  one  is  not  a  positive  benefit  to  the 
other.  The  evils  of  expansion  in  reference  to  the  relation 
of  debtor  and  creditor  are  like  those  of  a  summer  shower 
which  may  moisten  some  ungarnered  hay,  but  which  is  a  gen- 
eral blessing.  While  the  evils  of  contraction  in  reference  to 
this  relation  are  like  the  sweeping  blasts  of  a  tornado  at  sea 
that  strews  its  pathway  with  blighted  lives  and  the  wrecks 
of  human  hope  and  endeavor. 

As  there  are  individuals  and  industries  whose  status  is 
constantly  that  of  debtor  or  creditor,  so  there  are  large  sec- 
tions which  usually  or  constantly  hold  to  each  other  these 
relations.  And  not  only  is  it  not  derogatory  to  the  debtor 
•sections,  but  they  reflect  credit  upon  their  courage  in  assum- 
ing such  obligations,  to  give  opportunity  to  their  industry 
and  their  enterprise;  and  it  is  unworthy  of  exalted  station 
to  reproach  that  status  with  obloquy,  by  designating  it  as 
the  result  of  gambling  and  reckless  speculation. 

I  have  thus  far  considered  Senator  Jones'  plan  of  resump- 
tion on  the  hypothesis  that,  on  the  day  appointed  for  re- 
demption, the  government  would  have  hoarded  sufficient 
gold  to  respond  to  the  demand,  and  redeem  all  greenbacks 
in  gold.  But  the  plan  pre-supposes  that  the  government 
will  not  be  able  to  do  this,  or,  if  able  to  redeem  in  gold,  it 
may  be  inexpedient  to  do  so.  Therefore  a  redemption  with 
an  option  is  proposed.  Eedemption  with  an  option  is  not 
original  with  Mr.  Jones.     It  has  been  long  enough  before 


OF    SPECIE  PAYMENTS.  61 

the  Senate  to  have  its  merits  canvassed;  and  it  is  surprising 
that  it  should  be  repeatedly  presented  as  a  method  of  redemp- 
tion. To  redeem  legal  tenders  in  gold,  is  redemption,  a& 
commonly  understood.  To  refuse  to  redeem  in  gold,  after 
that  had  been  commenced,  would  be  suspension.  To  offer 
a  bond  instead  of  gold,  is  to  suspend  specie  payments  and 
to  offer  a  merchantable  article  at  a  fixed  price.  Nothing  is  said 
of  the  interest  such  bonds  should  bear.  If  the  interest  be 
five  per  cent.,  and  their  sale  value  in  foreign  markets  be  less, 
than  par — two  or  more  per  cent. — they  would  be  refused. 
This  would  necessitate  the  continuance  of  the  Gold  Board — 
and  there  would  De  a  gold  premium  so  long  as  the  government 
should  refuse  to  redeem  in  gold  and  offer  bonds  that  were 
worth  less  than  gold  in  the  market;  and  the  value  of  the 
bonds  would  react  upon  and  limit  the  premium  on  gold.  If, 
on  the  other  hand,  the  interest  on  these  bonds  be  placed 
high  enough  to  make  their  home  market  price,  gauged  hj 
their  foreign  market  price,  worth  more  than  gold  when  gold 
is  at  par  with  legal  tenders,  then  the  demand  would  be  con- 
stantly for  bonds  which  would  be  withheld  so  long  as  there 
was  gold  to  redeem  with;  and  those  applicants  for  redemp- 
tion would  be  the  most  fortunate  whose  greenbacks  would 
command  bonds.  We*  are  thus  conducted  to  the  following 
conclusions : 

1st.  That  the  interest  on  the  bonds  must  be  such  a  rate 
as  to  make  them  worth  par  or  more  than  par  in  gold  in  our 
market  or  they  will  not  be  accepted  except  in  preference  to 
gold  at  a  premium. 

2d.  That  though  the  interest  be  gauged  to  make  them  at 
par  with  gold,  financial  pertuibations  at  home  or  abroad 
might  depress  them  below  par,  when  they  would  become 
unacceptable,  and  therefore  unavailable  so  long  as  their 
market  price  renders  them  undesirable. 

3d.  The  exchange  and  cancellation  of  greenbacks  for 
bonds,  in  whatever  amount,  would  be  a  direct  contraction 
of  the  currency  to  that  amount. 

4th.  The  uncertainty  of  the  value  of  the  bonds  and  of  the 
continuance  of  redemption  in  gold,  would  continue  the  gold 
market,  and  gold  premium,  and  might  result  in  a  constant 
alternation  of  resumption  and  suspension  of  specie  pay- 
ments. 


€2  ESSAY  ON  RESUMPTION 

5th.  That  redemption  in  gold  by  i:)re venting  the  payment 
of  a  portion  of  the  national  interest-debt,  or  redemption 
in  bonds  by  increasing  our  national  interest-debt,  would 
impose  a  new  burden  upon  the  nation  of  more  than  twenty 
millions  of  dollars  annually. 

Mr.  Jones  proposes  to  repeal  the  legal  tender  clause.  If 
redemption  in  gold  on  and  after  the  day  appointed  is  to  be 
a  success,  this  is  very  much  like  hanging  a  man  and  then 
issuing  a  decree  to  prevent  him  from  exercising  his  civil 
functions. 

If  greenbacks  are  redeemable  in  gold,  and  at  par  with 
^old,  or  thereabout,  in  the  transactions  of  business,  they 
will  remain  a  part  of  the  currency  until  entii^ly  absorbed, 
and  will  be  used  in  the  settlement  of  accounts,  even  those 
settled  under  judgments  of  courts,  as  bank  bills  are  now, 
though  not  enforced  by  the  courts,  and  the  legal  tender 
clause  would  have  no  practical  effect. 

But  if  redemption  in  gold  is  not  to  be  a  success,  then  to 
repeal  the  legal  tender  clause  would  be  a  violation  of  the 
public  good  faith. 

When  the  legal  tenders  were  issued,  had  the  Government 
been  able  to  redeem  them  on  demand  in  gold,  there  is  no 
reason  to  believe  that  they  would  have  been  made  legal- 
tender.  But  because  this  could  not  be  done,  they  were 
made  legal-tender,  that  those  who  were  under  the  necessity 
of  receiving  them  in  settlement  of  accounts  might  in  tarn 
pay  them  in  settlement, of  accounts;  hence  their  withdrawal 
and  cancellation,  only,  can  cancel  this  attribute  without  a 
breach  of  faith. 

I  have  endeavored  to  show,  and  I  think  successfully,  that 
to  change  from  our  irredeemable  currency  basis  to  a  gold- 
base  currency  and  specie  payments  would  be  detrimental 
to  the  best  interests  of  the  whole  country ;  and  I  submit 
that  the  increased  interest  burden  necessitated  by  Senator 
Jones'  plan  of  resumption  (or  indeed  by  any  plan)  is  but  a 
small  part  of  the  increased  burdens,  the  end  of  which  no 
man  can  see,  that  would  inevitably  follow,  particularly  in 
view  of  the  fact  that  we  have  a  large  amount  of  foreign  in- 
debtedness to  pay,  interest  and  principal,  and  that  by  the 
change  proposed  we  virtually  agree  to  transport  our  export- 


OF  SPECIE  PAYMEtofiR/f  rr;7r»vi\K  V^         63 


able  products  from  the  center  to  the  shores  of  our  conti- 
nent and  across  the  ocean  to  the  shores  of  other  continents 
to  be  placed  upon  foreign  markets,  to  be  sold  at  their  prices, 
virtually  paying  all  costs  and  risks  of  transit,  though  the 
profits  of  transportation  be  reaped  by  foreign  commerce, 
to  obtain  the  money  necessary  to  pay  our  foreign  indebted- 
ness. In  other  words,  we  pay  them  in  our  products,  and 
transport  these  products  to  their  doors  and  accept  what 
they,  under  the  laws  of  trade,  choose  to  give  us  for  them. 
This  is  the  feast  to  which  we  are  invited. 

A  strong  pressure  is  brought  in  the  discussion  of  this 
question  to  impress  upon  the  public  mind  that  there  is  a 
present  imperative  and  irremovable  obligation  on  the  part 
of  the  Government  to  redeem  the  legal  tenders  in  gold  coin. 
This  obligation  is  based  upon  the  words  on  the  face  of  the 
legal  tenders — *'The  United  States  will  pay  to  the  bearer" 
or  ** promise  to  pay  to  the  bearer"  the  number  of  dollars 
designated .  These  phrases  are  stigmatized  as  Government 
lies,  as  ** dishonored  promises,"  *' promises  issued  with  a 
deliberate  intention  to  break  them"  —  'Hhat  they  are  not 
money,  but  lies."  These  epithets  are  applied  to  our  na- 
tional currency  by  a  moral  light  and  guide  in  the  land,  one 
endowed  with  divine  erudition — the  head  of  the  Divinity 
School  in  one  of  the  most  influential  and  venerable  institu- 
tions of  learning — one  who,  in  the  exercise  of  his  exalted 
sentiments  and  refined  and  elegant  taste,  speaks  of  the  ma- 
jority of  the  members  of  Congress  as  "simpletons"  —  ''or, 
if  not  simpletons,  then  knaves."^  The  Church, f  too,  in 
some  instances,  is  engaged  in  denouncing  the  immorality 
of  our  national  currency.  The  resumptionists  appear  to 
have  exhausted  their  arguments  on  the  basis  of  the  laws  of 
trade  and  finance,  and  also  their  patience,  and  now  are  call- 
ing to  their  aid  the  force  of  their  moral  enginery  to  shock 
and  arouse  the  conscience  of  the  nation,  to  induce  a  course 
of  policy  which  they  apprehend  will  not  be  sanctioned  by 
an  appeal  to  its  intelligence  on  the  basis  of  its  monetary 
interests. 


*  See  letter  of  Kev.  Dr.  Bacon,  of  Yale,  to  Hon.  W.  W.  Pbelps,  M.  C. 
N.  Y.  Tribune. 
+  Fast-Day  Sermon  of  Bev.  Dr.  Bartol. 


64  ESSAY  ON  KESUMPTION 

There  is  no  denial  of  the  promise,  but  its  present  demand 
is  of  the  nature  of  a  demand  for  a  pound  of  flesh — the  flesh 
to  be  taken  from  the  party  making  the  demand. 

A.  has  a  horse  to  sell.  He  ofiers  him  for  ninety  dollars 
in  gold,  or  one  hundred  dollars  in  currency.  B.  purchases 
the  horse,  and  will  pay  ninety  dollars  in  gold,  if  insisted 
upon,  or  one  hundred  dollars  in  currency.  To  avoid  the 
inconvenience  to  B.  of  converting  currency  into  gold,  and 
to  A.  of  reconverting  gold  into  currency  when  he  comes  to 
exchange  his  money  for  commodities,  A.  accepts — indeed, 
prefers — currency.  A.  sees  on  the  face  of  the  currency  a 
*' promise  to  pay." 

Now  do  the  equities  of  Divinity  Schools  teach  that  A.  has 
a  righteous  claim  f o^;  a  hundred  dollars  in  gold  ?  And  if  he 
demands  it,  is  his  demand  in  accordance  with  Divine  equity? 
Did  he  not  demand  and  receive  ten  dollars  in  currency  more 
than  the  value  of  his  horse  in  gold,  hecmise  the  Government 
was  unprepared,  or,  if  you  please,  refused,  or,  what  is  bet- 
ter, deemed  it  inexpedient  to  redeem  its  currency  in  gold  ? 
An^i  was  not  the  receipt  of  those  ten  dollars  a  waiver  of  his 
claim  to  payment  Sm.  gold  ?  And  has  he  a  Divine  moral 
right  to  retain  those  ten  dollars,  and  to  the  redemption 
of  his  full  amount  of  currency  in  gold,  dollar  for  dollar? 
And  if  Professors  of  Divinity  teach  the  affirmative  of  the 
first  of  these  questions,  to  whom  is  applicable  the  epithets 
'*  simpletons,"  or,  if  not  simpletons,  then  '* knaves?" 

If  A  has  no  equitable  right  to  demand  a  hundred  dollars 
in  gold  for  the  currency  he  received  for  his  horse,  then  how 
is  the  Government  under  obligation  to  pay  him  a  hundred 
dollars  in  gold  for  that  currency.  And  is  the  Government's 
honor  irretrievably  lost  if  it  refuses  to  violate  equity  to 
carry  out  a  technical  promise  ? 

Does  A  persist  in  his  demand  for  gold  redemption?  The 
Government  replies  that  it  is  not  prepared,  but  if  A  will 
submit  to  be  taxed  one  hundred  dollars  in  gold,  or  will 
authorize  it  to  obtain  a  loan  in  his  name  of  one  hundred 
dollars  bearing  interest,  which  he  must  pay  in  increased 
taxation,  and  a  majority  of  his  fellow  citizens  unite  with 
him  in  a  like  demand  under  like  conditions,  it  will  obey 
their  behests,  as  their  humble  servant,  and  that  whatever  it 


OJ*  SPECIE   PAYMENTS.  65 

does,  must  be  dond  in  their  name  and  at  their  cost,  and  if  a 
majority  of  his  fellow  citizens  refuse  to  join  in  his  demand 
for  gold  redemption  at  such  unavoidable  costs,  are  they  to 
be  stigmatized  as  repudiators  seeking  their  country's  dis- 
honor? or  as  ** simpletons"  **or  if  not  simpletons,  knaves?" 
And  is  A  whose  avarice  seeks  to  increase  the  purchasing 
power  of  his  hundred  dollars  of  currency  through  resump- 
tion and  increased  national  taxation,  the  man  to  stand  upon 
a  pedestal  as  a  model  of  honesty  and  honor,  while  he  points 
the  finger  of  scorn  at  his  fellow  citizens  as  dishonorable 
lepudiators? 

The  gold  to  be  paid  to  the  people  must  be  furnished  by 
the  people,  and  when  the  burden  has  been  changed  from 
one  shoulder  to  the  other,  it  will  be  found  to  be  augmented 
by  the  interest  on  increased  interest  bearing-national  debt. 
And  this  obligation  or  promise  being  from  the  people  to 
the  people,  the  people  have  a  moral  right  to  determine 
what  policy  they  will  pursue,  so  long  as  they  make  no 
invidious  distinctions  against  individuals  or  classes.         * 

The  burdens  of  taxation  would  not  fall  upon  individuals 
in  the  ratio  of  the  money  they  held  for  redemption.  There- 
in would  be  the  greater  injustice.  Those  whose  wealth  was 
in  the  form  of  currency  and  currency  demands  would  be 
immediate,  or  at  least  relative,  gainers  by  the  policy  of  re- 
demption, while  their  gains  would  be  added  to  the  other 
burdens  of  redemption  in  gold,  to  be  borne  by  those  whose 
wealth  or  interests  were  in  other  forms;  and  eventually  all 
classes  would  suffer  by  the  mal-policy  of  redemption. 

The  currency  valued  as  an  investment. 

The  article  in  the  North  American  Review ^  Jan.,  1874, 
before  referred  to,  assumes  that  the  value  of  the  currency  is 
not  indicated  by  the  gold  premium,  that  is  purely  acci- 
dental; that  its  true  value  cannot  be  determined,  because  it 
is  not  known  when  it  will  be  redeemed;  that  if  the  Govern- 
ment should  determine  to  redeem  its  currency  in  gold  in 
1884,  its  value  might  readily  be  computed  by  finding  the 
value  of  a  note  running  ten  years  to  maturity.  This  hy- 
pothesis, computing  at  six  per  cent.,  simple  interest,  gives 
sixty-two  and  half  per  cent,  as  the  value  of  currency,  or  a 
5 


66  ESSAY  ON  RESUMPTION 

gold  premium  of  sixty  per  cent,  instead  of  twelve  to  fifteen 
per  cent,  as  at  present.  Compound  interest  would  make 
the  difference  still  greater. 

How  can  it  be  sanely  assumed  that  the  currency  is  only 
worth  sixty-two  and  a  half  per  cent,  in  gold  because  the 
government  should  postpone  redemption  ten  years,  when  it 
can  be  converted  into  eighty-eight  per  cent,  of  gold,  by  sim- 
ply going  into  the  market  for  that  purpose? 

The  hypothesis  proceeds  upon  the  assumption  that  a  gov- 
ernment note  is  an  investment,  and  not  currency:  and  that 
its  current  convertible  value  depends  upon  the  time  of  its 
redemption,  and  not  upon  the  fact  that,  nominal  commer- 
cial values  are  adjusted  to  the  quantity  of  currency  (as  stated 
in  the  article  referred  to)  and  that  the  price  of  gold,  like 
that  of  all  other  commodities,  is  adjusted  by  demand  and 
supply,  and  regulated  to  *the  currency  and  the  prices  of  all 
other  commodities,  through  the  gold  premium. 

By  converting  currency  into  an  investment  a  part  of  its 
Ijalue  (as  a  currency)  is  destroyed.  On  the  same  supposition, 
if  a  hundred  dollars  in  gold  were  locked  up  as  an  invest- 
ment to  remain  ten  years,  three  eighths  of  its  present  value 
would  be  destroyed  at  a  computation  at  simple  interest :  and 
this  would  be  but  little  more  absurd  than  to  lock  up  as  an 
investment,  currency  convertible  into  eighty-eight  or  ninety 
per  cent,  of  gold,  and  keep  it  locked  up  ten  years  till  the 
day  set  for  redemption,  in  order  to  prove  that  its  present 
true  value  is  only  five  eighths  of  its  nominal  value. 

It  may  be  replied  on  the  hypothesis  under  consideration, 
that  if  the  date  of  redemption  were  set  ten  years  hence,  that 
thereupon  currency  could  not  be  converted  into  eighty-eight 
per  cent,  of  gold — that  the  gold  premium  would  rise,  and 
the  convertibility  of  currency  into  gold  would  sink  in  the 
ratio  of  the  discount  of  a  personal  note  having  ten  years  to 
run  without  interest. 

This  reply,  like  the  hypothesis  itself,  is  a  groundless 
assumption.  It  comes  from  regarding  the  currency  as  a 
debt  of  the  government,  and  that  its  current  value  depends 
upon  the  credit  which  each  recipient  extends  to  the  govern- 
ment's debt,  and  that  it  is  a  forced  loan  from  the  people  to 
the  government ;  and  from  disregarding  the  uses  and  nature  of 


OF  SPECIE  PAYMENTS.  67 

currency  as  a  currency,  its  power  to  measure  values,  to  effect 
exchanges  and  to  settle  accounts;  and  that  it  has  a  current 
value  which  is  at  all  times  convertible  into  intrinsic  value  in 
every  desirable  form  of  purchasable  commodities  or  inter- 
ests, including  gold  itself,  at  prices  measured  in  the  aggre- 
gate by  its  volume,  like  all  other  currencies  which  consum- 
mate payments,  and  at  respective  relative  prices  as  the 
various  commodities  and  interests  are  affected  relatively  by 
the  laws  of  trade;  and  by  entertaining  the  idea  that  nothing 
is  payment  that  is  not  a  transfer  of  intrinsic  value. 

I  meet  the  assumption  by  a  counter  assertion,  based  upon 
the  general  laws  of  trade  governing  currencies  and  our  irre- 
deemable currency  in  particular,  that  were  Congress  to 
resolve  to  not  redeem  the  currency  in  less  than  ten  years 
and  make  no  guaranty  to  redeem  it  then,  that  such  policy 
would  not  affect  the  gold  premium  two  per  cent,  unless, 
perhaps,  spasmodically  for  a  week  or  two,  when  it  would 
regain  its  equilibrium. 

If  the  currency  were  a  debt  of  the  government  to  the  peo- 
ple, and  a  forced  loan  from  the  people,  the  government  be- 
ing only  an  agency  of  the  people,  its  debts  are  their  debts, 
and  in  reference  to  the  currency  they  are  debtors  and  cred- 
itors, and  the  account  is  balanced. 

The  currency  is  neither  a  debt  nor  a  loan,  but  an  instru- 
mentality of  business,  by  creating  which  the  government 
saved  to  the  .people  the  necessity  of  issuing  four  hundred 
millions  of  interest-bearing  bonds,  and  was  enabled  to 
facilitate  the  sale  of  the  lessened  amount  it  was  necessary 
to  issue.  And  a  saving  to  the  people  of  the  interest  on 
bonds  equal  to  the  amount  of  legal  tender  currency  will 
continue  so  long  as  they  use  it  as  a  currency. 

When  the  legal  tenders  were  first  issued  it  is  probable 
every  man  who  voted  for  them  regarded  them  as  a  tempo- 
rary currency  to  supply  a  temporary  want,  and  it  was  not 
the  intention  to  issue  a  permanently  irredeemable  currency. 
And  it  is  very  probable  that  it  was  not  the  intention  to 
change  the  basis  of  the  circulating  medium;  and  had  it 
been  a  non-legal  tender,  like  all  former  issues  of  paper 
money,  it  could  not  have  changed  the  basis  of  the  currency, 
it  could  not  have  been  the  par  of  values,  it  could  not  have 


68  ESSAY  ON  RESUMPTION 

been  kept  at  par  in  effecting  exchanges  or  in  the  settlement . 
of  accounts,  but  would  immediately  have  sunk  to  a  discount, . 
and  would  have  been  subject  to  all  the  vicissitudes  of  the ; 
continental  currency  of  the  Revolution,  but  by  being  made 
a  legal  tender  that  its  recipients  from  the  Government,  di- 
rectly or  remotely,  should  be  enabled  to  pass  it  as  they  had 
been  forced  to  receive  it,  at  par  in  the  settlement  of  ac- 
counts, it  became  immediately  the  basis  of  all  accounts  and 
all  values :  and  the  State  banks  changed  the  basis  o£  their, 
circulation  from  gold  to  legal  tender  because  they  were; 
enabled  to  redeem  their  promises  in  legal  tenders  instead! 
of  gold.  The  law  of  Congress  making  Government  issues, 
a  legal  tender,  the  law  of  finance  placed  all  accounts,,  alii 
values,  and  consequently  all  business  on  that  basis,  audi 
gold  was  demonetized,  and  the  quantity  of  gold  in  a  gold' 
dollar  became  worth  more  than  a  dollar  by  currency  meas- 
ure of  values.  When  the  Government  issued  the  legal 
tenders  it  could  not  redeem  them  in  gold  on  demand.  If 
it  could  have  done  so  it  would  not  have  made  them  legal 
tenders,  because  every  one  receiving  them  would  have  had! 
his  protection  against  loss  by  demanding  redemption  ini 
gold.  The  Government  did  not  promise  to  pay  on  denaandl. 
In  lieu  of  this,  and  as  an  equivalent  protection,  it  made  its, 
issues  legal  tenders.  This  changed  the  nature  of  its,  issues; 
from  that  of  a  loan  and  debt  to  that  of  a  currency. 

A  loan  presupposes  the  transfer  or  withholding  of  active 
capital  from  the  loanor,  to,  or  by  the  loanee,  and  whenever 
a  loan  is  effected  a  rate  of  interest  is  guaranteed  the  loanor 
as  a  recompense  for  the  loss  by  the  detention  of  active  capi- 
tdly  and  when  no  interest  is  guaranteed  the  loss  is  suffered 
by  a  discount  in  the  market  value  of  the  debt.  This  in- 
heres in  the  nature  of  a  loan,  by  the  laws  of  finance  and 
business. 

The  issuance  of  the  currency  is  not  a  detention  or  ab- 
straction of  active  capital  from  the  people  or  from  the  in- 
dividuals to  whom  it  is  issued.  It  is  itself  active  capital. 
It  may  be  said  that  it  draws  no  interest  and  yields  no  profit 
while  it  is  held  in  hand.  The  same  is  the  case  with  gold 
coin,  or  any  currency.  A  hundred  dollars  in  gold  will  yield 
rio  man  a  profit  so  lon^  as  he  l^eeps  it  in  his  pocket;  when 


OF  SPECIE  PAYMENTS.  69 

it  is  currency,  and  not  a  commodity.  He  can  only  be  prof- 
ited by  it  by  parting  with  it.  If  it  becomes  interest-bear- 
ing, and  made  profitable  to  hold,  it  is  impaired  as  a  cur- 
rency, and  becomes  an  investment  in  the  ratio  that  its 
interest  approaches  the  ordinary  profits  of  investments. 

On  the  hypothesis  that  the  currency  is  only  a  non-interest 
paying  debt,  and  a  forced  loan  from  the  people,  why  is  it 
that  every  man  who  has  an  audited  certified  claim  against 
the  Government  is  desirous  to  cancel  his  claim  by  the  re- 
ceipt of  currency  payment  ?  On  this'  hypothesis  he  would 
only  have  changed  the  form  of  his  claim ;  he  would  not  have 
received  payment.  Why  so  universal  a  desire  to  obtain  so 
small  a  result?  It  is  because  the  hypothesis  is  false.  When 
a  man  holds  a  valid  claim  against  the  Government,  he  can 
only  convert  it  into  active  capital  by  a  discount  proportion- 
ate to  the  current  rate  of  interest  for  the  time  that  will  prob- 
ably elapse  before  the  Government  will  make  payment  in 
currency — and  when  he  has  converted  it,  he  only  receives 
currency  (another  form  of  claim,  so  called,  against  the  Gov- 
ernment). He  suffers  the  discount,  because  he  can  thereby 
change  his  non-active  capital  (claim)  into  active  capital  (cur- 
rency)— and  the  purchaser  of  the  claim  makes  an  investment 
of  active  capital,  and  receives  the  discount  as  a  compensa- 
tion for  the  detention  of  his  active  capital  until  the  payment 
of  the  claim ;  when  his  active  capital  is  restored  to  him. 

The  conclusion  is  therefore  inevitable,  that  a  loan  cannot 
be  made  from  the  people  or  from  individuals  to  the  Govern- 
ment, without  a  surrender  of  active  capital ;  and  therefore 
the  Government  does  not  obtain  a  loan  from  the  people  by 
furnishing  a  currency  for  the  people. 

A  non-interest  bearing  claim  against  the  Government,  in 
the  hands  of  the  claimant,  is  a  species  of  non-active  capital. 
By  its  payment  in  currency,  and  cancelation,  it  is  converted 
into  active  capital,  and  that  is  payment.  The  claim  is  can- 
celed, the  account  is  closed  and  balanced,  and  ultimated 
and  consummated  in  fact  and  in  law,  and  that  is  payment. 

The  non-active  capital  in  the  claim  has  been  converted 
into  active  capital  in  the  possession  and  ownership  of  the 
claimant,  and  is  convertible  at  will  into  every  form  of  in- 
trinsic value,  including  gold,  and  into  every  desirable  form 
of  possession  in  the  civilized  world  by  virtue  of  its  currency 


70  ESSAY  ON   BESUMPTION 

properties  within  our  own  country,  and  through  the  laws  of 
trade  and  commerce  elsewhere.  And  thus  the  possessor 
has  his  payment.  And  whenever  he  exchanges  his  currency 
for  any  purchasable  article,  or  for  any  object  whatever,  at 
his  option,  that  is  redemption  to  him.  The  people  who  is- 
sued it  to  him  through  their  government  have  kept  their 
faith,  and  redeemed  it.  And  so  long  as  the  legal  tenders 
remain  unimpaired  as  a  currency,  the  promise  to  pay  is  not 
.iil'Obligation  on  demand.  But  whenever  the  Government 
impairs  them  as  a  currency  by  repealing  the  legal  tender 
clause,  or  otherwise,  the  promise  to  pay  will  become  an 
obligation,  and  will  be  redeemed  in  good  faith. 

The  good  faith  of  the  nation  in  the  event  of  the  impair- 
ment or  extinction  of  the  currency,  would  be  as  imperative- 
ly bound  to  protect  the  holders  against  loss,  if  the  words 
'* promise  to  pay"  were  not  on  the  face  of  the  notes;  and 
any  Congress  which  the  American  people  shall  elect  will 
have  sense  and  conscience  and  interest  and  consideration 
enough  not  to  disregard  that  obligation.  The  promissory 
phrases  are  unnecessary  to  the  legal  tenders  as  a  currency, 
and  might  be  omitted  without  impairment,  as  they  are 
omitted  from  the  fractional  currency,  which  no  one  believes 
is  less  protected  by  the  good  faith  of  the  government  on 
that  account.  And  irritable  and  egotistical  Doctors  of 
Divinity  may  rest  assured  that  the  honor  of  the  Nation  rests 
not  solely  upon  their  shoulders,  even  if  the  increase  by  re- 
sumption of  the  purchasing  power  of  their  salaries  shall  be 
indefinitely  postponed. 


RESUME. 

I  have  endeavored  to  show  that  "resumption  of  specie 
pajonents,"  does  not  guarantee  steadiness  of  business,  and 
that  it  is  in  no  sense  a  sound  financial  basis,  but  on  the 
contrary  presupposes  ebbs  and  flows  of  the  currency  base 
from  and  to  our  country  through  the  laws  of  commerce — 
continual  alternations  of  contraction  and  expansion  of  the 
currency,  and  rising  and  falling  tides  of  prices,  detrimental 
to  business  and  business  equities,  causing  us  in  our  com- 
mercial relations  to  "buy  dear  and  sell  cheap;"  and  that  our 


OF  SPECIE  PAYMENTS.  71 

irredeemable  currency  maintained  in  a  constant  ratio  to  the 
population,  is  attended  with  contrary  and  desirable  results, 
and  affords  the  best  guaranty  against  these  evils. 

And  that  the  gold  premium  has  become  the  best  indicator 
of  the  business  status  and  prospect;  and  that  a  rising  pre- 
mium indicates  increasing  business  activity,  and  a  falling 
premium  indicates  a  shrinkage  of  prices  and  business 
obstruction.  And  that  the  business  indications  of  the  bal- 
ance of  trade,  and  the  rate  of  foreign  exchange  under  a  gol 
base  currency,  have  been  reversed  by  our  irredeemable  currency. 

I  have  also  endeavored  to  show  that  the  great  amount  of 
national,  state  and  municipal  bonds  and  investment  securi- 
ties held  by  our  people  at  the  close  of  the  war,  and  those 
since  issued,  inevitably  flow  to  European  markets,  from  the 
great  amount  of  accumulating  capital  seeking  investment 
there  at  lower  rates  of  interest  than  are  usually  obtained  in 
this  country;  and  that  the  exportation  of  these  securities 
would  have  taken  place  under  any  system  of  finance. 

Under  a  gold  base  currency  it  would  have  tended  to  ac- 
cumulate gold  like  an  excess  of  any  kind  of  exportation s, 
which  would  have  served  to  increase  banking  capital  and 
enlarge  the  bank  circulation,  which  would  have  continued 
to  expand  until  the  exportation  of  securities  would  have 
been  checked  by  exhaustion,  and  its  culmination  would 
have  been  followed  by  a  panic  and  business  paralysis  such 
as  the  country  has  never  experienced,  not  even  in  1837. 

And  that  under  our  irredeemable  currency,  the  exporta- 
tion of  these  securities  has  had  a  depressing  effect  upon 
general  business — first,  and  in  the  greatest  measure,  by 
direct  competition  with  our  exportable  products,  and 
secondly,  by  facilitating  importations,  in  direct  competition 
with  many  domestic  industries  and  interests  ;  but  this  de- 
pressing effect  has  been  modified,  though  far  from  fully 
compensated,  by  the  increased  prosperity,  experienced  in 
those  countries  from  which  we  have  largely  imported,  and 
thereby  widened  the  demand  and  kept  up  the  gold  prices 
for  our  exports  in  their  markets.  That  this  cause  of  depres- 
sion being  wholly  or  nearly  exhausted,  its  exhaustion  will 
bring  relief  to  those  great  industries  and  sections  that  have 
been  deleteriously  affected  by  it.  And  that  the  payment  of 
the  interest,  or  the  principal  at  maturity  or  before,  will  have 


72  ESSAY  ON  RESUMI>T10N 

a  stimulating  and  reviving  effect  upon  business,  and  will  be 
an  inconsiderable  burden  and  easily  borne  under  the  in- 
spiration and  buoyancy  of  guaranteed  business  prosperity. 

And  that  instead  of  our  foreign  indebtedness  and  foreign 
credit  being  a  source  of  constant  anxiety  and  alarm,  causing 
business  perturbations,  as  they  would  be  under  a  gold  base 
currency,  subject  to  every  monetary  contingency  and  every 
foreign  or  international  complication,  and  the  friendship  or 
animosity  of  the  leaders  of  public  opinion  abroad,  under 
our  irredeemable  currency  we  are  utterly  independent  of 
these  considerations,  because  a  diminution  of  our  foreign 
credit  and  return  of  our  securities  for  payment  or  purchase 
will  be  a  direct  cause  of  business  prosperity  and  rejoicing; 
and  this  gives  us  a  masterly  business  status  in  reference  to 
all  questions  of  international  diplomacy.  And  that  the  dis- 
tribution of  the  currency  has  been  peculiarly  affected  by  the 
cause  that  has  depressed  the  currency  prices  of  exportable 
products,  adversely  to  great  industries,  interests  and  sec- 
tions, and  that  the  exhaustion  of  this  cause  will  restore  to 
those  industries,  interests  and  sections  a  due  and  adequate 
share  of  the  common  currency. 

These  are  the  main  points  I  have  attempted  to  elucidate. 

My  comments  on  the  speech  of  Senator  Jones  are  not  so 
much  intended  to  controvert  the  tenor  of  his  statements  of 
facts,  though  he  indulges  in  hyperbole,  as  to  call  attention 
to  the  fallacies  of  his  reasoning,  conclusions  and  proposi' 
tions,  and  to  direct  attention  to  the  true  cause  of  the  finan- 
cial  and  commercial  phenomena  of  which  he  complains,  and 
to  show  that  they  are  not  attributable  to  our  irredeemable 
currency,  and  would  only  be  aggravated  by  resumption. 
And  my  comments  upon  the  letter  of  Kev.  Dr.  Bacon  are 
intended  as  a  defense,  however  feeble,  against  the  animadver- 
sions upon  our  country's  currency,  statesmen  and  national 
honor  of  a  growing  throng  who  assume  superior  airs,  and 
who,  having  exhausted  their  logic  and  their  patience,  avail 
themselves  of  the  opportunity  to  issue  their  reserves  of  de- 
traction. 

Trusting  that  this  brief  contribution  to  the  general  dis- 
cussion of  the  financial  problem  may  not  prove  altogether 
valueless,  I  commend  it  to  the  attention  and  candid  consid- 
eration of  my  fellow-citizens,  fi  ^^j^^^^^CTFrT?^ 

UNIVERSITY 


